Ignoring Income Taxes, Choose the Correct Response Below Regarding Total

question 12

Multiple Choice

Ignoring income taxes, choose the correct response below regarding total stockholders' equity resulting from classifying all investments for a firm either as trading securities or securities available-for-sale.

• A) Stockholders' equity is greater if the investments are classified as trading securities.
• B) Stockholders' equity is greater if the investments are classified as available-for-sale.
• C) Stockholders' equity is the same regardless of the classification.
• D) If there have been unrealized gains, classification as trading securities results in higher stockholders' equity.

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Definitions:

Corrective Tax

A tax designed to encourage or discourage certain behaviors or activities by including the cost of externalities, aimed at correcting market outcomes to reflect social costs or benefits.

Supply Curve

A graphical representation showing the relationship between the quantity of a good supplied and its price.

Pollution Rights

Tradable permits or licenses that allow the holder to emit a certain amount of pollution; used as an economic tool for controlling and reducing environmental degradation.

Pollution Permits

Allowances issued by governments that give companies the right to emit a certain amount of pollutants, intended to reduce overall pollution by market mechanisms.