In Its First Year of Operations, Rodolfo Company Purchased Available-For-Sale

question 48

Multiple Choice

In its first year of operations, Rodolfo Company purchased available-for-sale securities at a total cost of $53, 000.On December 31, the end of Rodolfo's fiscal year, the fair market value of those investments totaled $57, 000.As a result of these investments, Rodolfo Company will report

• A)Investment in Available-for-Sale Securities of $57, 000
• B)Investment in Available-for-Sale Securities of $53, 000
• C)Unrealized Increase in Value of Available-for-Sale Securities of $4, 000 on the income statement as ordinary income
• D)a credit balance in the contra account to Investment in Available-for-Sale Securities of $4, 000

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Definitions:

APB No.25

An accounting principle that dealt with stock-based compensation and required companies to record an expense for issued options.

Vesting Period

The period of time an employee must work before gaining full access to their benefits or compensation plans, such as pension plans or stock options.

Stock Options

Financial instruments that give employees the right to buy or sell shares of their company at a predetermined price.

Grant Period

The time frame during which certain rights, such as stock options, are awarded to employees and can be exercised.