A Company Has a Long-Term Investment in Available-For-Sale Securities

question 57

Multiple Choice

A company has a long-term Investment in Available-for-Sale Securities. The investor's percentage ownership is 5%. On January 1, 2017, the purchase date, the cost of the stock investment was $107,000. On December 31, 2017, the fair value of the investment is $105,000. An allowance account is used to write-down the investment. On January 30, 2018, the investor sold the stock for $99,650. What journal entries are required on January 30, 2018?

• A)debit Allowance to Adjust Investment in Available-for-Sale Securities to Market for $2000 and credit Unrealized Loss on Investment in Available-for-Sale Securities for $2000
• B)debit Cash for $99,650, debit Loss on Sale of Investment in Available-for-Sale Securities for $7350 and credit Investment in Available-for-Sale Securities for $107,000
• C)debit Cash for $99,650, debit Loss on Sale of Investment of Available-for-Sale Securities for $5350 and credit Investment in Available-for-Sale Securities for $105,000
• D)A and B

Understand the concept of iso-profit lines and their role in solving maximization problems.

Identify feasible solutions for given constraints in linear programming problems.

Understand the significance of shadow prices or dual values in linear programming.

Formulate linear programming constraints based on problem statements.

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Definitions:

Event

In probability and statistics, an outcome or a set of outcomes of a random experiment; an event defines a specific occurrence within a sample space.

Probability Theory

The branch of mathematics that deals with the analysis of random phenomena and the likelihood of various outcomes.

Outcome

The result or consequence of an experiment or action, often considered in the context of probabilities.

Sample Space

The set of all possible outcomes or results in a statistical experiment or random trial, from which samples can be drawn for analysis.