Question

At acquisition, debt securities are: A. Recorded at their cost, plus total interest that will be paid over the life of the security. B. Recorded at the amount of interest that will be paid over the life of the security. C. Recorded at cost. D. Not recorded, because no interest is due yet. E. Recorded at cost plus the amount of dividend income to be received.

Answer 1

Answer:

C. Recorded at cost.

Explanation:

At acquisition, debt securities are Recorded at their cost, plus total interest that will be received over the life of the security.

A debt security refers to money borrowed that must be repaid that has a fixed amount, a maturity date(s), and usually a specific rate of interest. Some debt securities are discounted in the original purchase price. Examples of debt securities are treasury bills, bonds, and commercial paper.

Answer 2

Answer:

Recorded at cost.

Explanation:

Debt security can be described as an amount of money that is borrowed and must be paid back.

Debt securities contain terms which clearly states the amount of the loan, the interest rate to be paid, and the renewal or maturity date on which the final scheduled repayment of the loan is due. Examples of debt securities include bonds, treasury bills, certificates of deposit, commercial paper.

The interest rate that is to be paid on a debt security is usually determined by the credibility of the issuer.