If the Cost of an Non-Trading Security Exceeds Its Fair

question 55

Multiple Choice

If the cost of an non-trading security exceeds its fair value by $40,000, the entry to recognize the loss

• A) is not required since the share prices will likely rebound in the long run.
• B) will show a debit to an expense account.
• C) will show a credit to a contra-asset account that appears in the equity section of the statement of financial position.
• D) will show a debit to an unrealized loss account that is deducted in the equity section of the statement of financial position.

---

Definitions:

Lease Agreement

A contract between two parties where one party agrees to rent property owned by another party, often specifying terms and conditions for use and payment.

Straight-Line Method

A method of depreciation that allocates an equal expense amount to each year of the asset's useful life.

Effective-Interest Method

A way of calculating the amortized cost of a bond and the amount of interest expense over time.

Interest Payment Dates

Specific dates set in a loan agreement or bond indenture on which interest payments are made to lenders or bondholders.