Use the Following Information for Questions 7 and 8

question 128

Multiple Choice

Use the following information for questions 7 and 8
Rushia Company has an available-for-sale investment in the 10%, 10-year bonds of Pear Company The investment's carrying value is $3,200,000 at December 31, 2014. On January 9, 2015, Rushia learns that Pear Company has lost its primary manufacturing facility in an uninsured fire. As a result, Rushia determines that the investment is impaired and now has a fair value of $2,300,000. In June, 2016, Pear Company has succeeded in rebuilding its manufacturing facility, and its prospects have improved as a result.
-If Rushia Company determines that the fair value of the investment is now $3,900,000 and is using U.S. GAAP for its external financial reporting, which of the following is true?

• A) Rushia is prohibited from recording the recovery in value of the impaired investment.
• B) Rushia may record a recovery of $900,000.
• C) Rushia may record a recovery of $700,000.
• D) Rushia may record a recovery of $1,600,000.

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Definitions:

Capitalist Economy

An economic system where private individuals or businesses own capital goods, and the production of goods and services is based on supply and demand.

Employment Discrimination

Occurs when a job applicant or employee is treated unfavorably because of characteristics, such as race, gender, age, or disability, that are unrelated to their job performance.

Earnings

The amount of profit that a company produces during a specific period, which is a key indicator of its financial health.

Short-Run Cost Curves

Graphical representations showing how a firm's costs change in relation to output level in the short term, where some inputs are fixed.