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Chapter 13: Q17-6Q (page 658)

Question: Explain how trading debt securities are accounted for and reported?

Short Answer

Expert verified

Answer:

Trading debt securities are reported on their fair value.

Step by step solution

01

Definition of trading debt securities

Trading debt securities are those securities sold after some time for short-term gain.

02

Step 2:Accounting of debt securities

Accounting and the reporting of the trading debt securities are very simple. Generally, the trading debt securities are reported on their fair value. Trading debt securities are reported on the fair of currency in which securities are issued.

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Question: On February 1, 2018, one of the huge storage tanks of Viking Manufacturing Company exploded. Windows in houses and other buildings within a one-mile radius of the explosion were severely damaged, and a number of people were injured. As of February 15, 2018 (When the December 31, 2017, financial statements were completed and sent to the publisher for printing and public distribution), no suits had been filed or claims asserted against the company as a consequence of the explosion. The company fully anticipates that suits will be filed and claims asserted for injuries and damages. Because the casualty was uninsured and the company is considered at fault, Viking Manufacturing will have to cover the damages from its own resources.InstructionsDiscuss fully the accounting treatment and disclosures that should be accorded the casualty and related contingent losses in the financial statements dated December 31, 2017.
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