A marketable equity security is transferred from the available-for-sale portfolio to the trading securities portfolio.  At the transfer date, the security’s cost exceeds its market value.  What amount is used at the transfer date to record the security in the trading portfolio?

< name="Answer" value="6631" ="">A. Market value, regardless of whether the decline in market value below cost is considered permanent or temporary.
< name="Answer" value="6632" ="">B. Market value, only if the decline in market value below cost is considered permanent.
< name="Answer" value="6633" ="">C. Cost, if the decline in market value below cost is considered temporary.
< name="Answer" value="6634" ="">D. Cost, regardless of whether the decline in market value below cost is considered permanent or temporary.

A security in an available-for-sale securities portfolio is transferred to a held-to-maturity securities portfolio.  The security should be transferred between the corresponding portfolios at

< name="Answer" value="6635" ="">A. The book value at date of transfer if higher than the market value at date of transfer.
< name="Answer" value="6636" ="">B. The market value at date of transfer, regardless of its cost.
< name="Answer" value="6637" ="">C. Its cost, regardless of the market value at date of transfer.
< name="Answer" value="6638" ="">D. The lower of its cost or market value at date of transfer.

Answer B is correct. Any transfer of securities between categories of investments should be accounted for at fair value.  In addition, any unrealized holding gain or loss on securities transferred from available-for-sale to held-to-maturity continues to be reported as “Accumulated other comprehensive income” in stockholders' equity but is amortized over the remaining life of the security.

Please read the highlighted explanation...In first, it is saying to recognize in earnings immediately and in second it is the opposite..plz confirm..

I agree,

they are 2 different cases,

at first: the security is transferred from available-for-sale to trading

accumulated unrealized gains or losses will be recognized in income statement, which is consistent with accounting for trading securities, trading securities are recorded at fair value and changes in fair value recognized immediately in the income statement.

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while in the second problem, the security is transferred from available-for-sale to held-to-maturity.

in this case accumulated unrealized gains or losses will stay in Accumulated other comprehensive income in equity, but it will be amortized, and recognized in income statement, over the life of the security.

I hope this helps