As of 12/31/20, XYZ Inc

question 72

Multiple Choice

As of 12/31/20, XYZ Inc. had available-for-sale debt investments with a fair value of $505,000, an amortized cost of $542,000, and a debit balance in the Fair Value Adjustment - Available for Sale Debt Investments account of $7,200. What is the amount of gain or loss reported by XYZ related to these available-for-sale debt investments and how should it be reported?

• A) Unrealized Loss of $37,000, reported as part of Other Comprehensive Income.
• B) Unrealized Loss of $44,200, reported as part of Net Income.
• C) Unrealized Loss of $44,200, reported as part of Other Comprehensive Income.
• D) Unrealized Loss of $37,000, reported as part of Net Income.

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Definitions:

Price Takers

Market participants who accept the prevailing market price without having the influence to change it due to their relatively small size in the market.

Loss-minimizing

A strategy employed by businesses to reduce the amount of financial losses incurred during unfavorable market conditions or through poor operational decisions.

Units of Output

The quantity of product produced, serving as a measure of a firm's or industry's total production.

Profit-maximizing

A strategy or approach aimed at achieving the highest possible profit, where revenue exceeds costs by the greatest amount.