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Trading Investments
Trading securities include both debt and equity securities that the company acquires intending to earn profits on short-term differences in price. These investments are recorded at cost which includes brokerage fees. Debt and equity securities classified as trading investments will be recorded at cost and reported at Fair Value. One may use a fair value adjustment account as illustrated in your textbook on page 629 or choose to simply adjust the investment account to fair value. The book (on page 626) shows recording the investment in debt securities with a separate “discount on bond investment” account and on page 627, amortizing the discount when interest is received. Due to the brief time that these investments will be held by the company, it is not practical to amortize bond discounts or premiums. It is theoretically correct, but it is not practical SO we will not amortize bond discounts or premiums on Trading Securities.
EXAMPLE – TRADING SECURITIES: Assume all the securities were purchased during 2010.
2010 trading securities portfolio:
Sounds boring eh?
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