A Small Long-Term Investment in Equity Securities Was Purchased on May

question 47

Multiple Choice

A small long-term investment in equity securities was purchased on May 2 for $1,000. On December 31, the market value of those securities is $1,100. Which of the following is part of the adjusting entry necessary on December 31?

• A)Debit Unrealized Gain for $1,100
• B)Debit Realized Gain for $100
• C)Credit Short-term Equity Investments for $100
• D)Credit Unrealized Gain for $100

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Definitions:

Nominal Rate

The interest rate before adjustments for inflation, representing the face value of financial products.

Real Rate

The interest rate that has been adjusted for inflation, reflecting the true cost of borrowing or the actual earnings on an investment.

Expected Rate

The anticipated return or yield on an investment or savings account, often based on historical data or statistical analysis.

Business Cycle

The fluctuating levels of economic activity that an economy experiences over a period, characterized by expansion and contraction phases.