1. Under current GAAP for marketable securities, trading securities and available-for-sale securities are reported at their fair value, but held-to-maturity securities are reported at their amortized cost.

Required:

Explain why there is a difference in the reporting requirements for these three classifications of marketable securities. Minimum 3 paragraphs.

2/ A marketable security is initially classified as trading security, available-for-sale security, or held-to-maturity debt security. Subsequently, security can be transferred among categories.

Required:

Explain the accounting for a related unrealized holding gain or loss when a transfer to another category occurs. Minimum 3 paragraphs.