In Recognizing a Decline in the Fair Value of Short-Term

question 69

Multiple Choice

In recognizing a decline in the fair value of short-term stock investments an unrealized loss account is debited because

• A) management intends to realize this loss in the near future.
• B) the securities have not been sold.
• C) the stock market is volatile.
• D) management cannot determine the exact amount of the loss in value.

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Definitions:

Potential Energy

The energy stored in an object or system due to its position, condition, or composition, available to do work when its state changes.

Kinetic Energy

The energy possessed by an object due to its motion, which is defined by mass and velocity.

Chemical Energy

Energy associated with the interaction of atoms in a molecule.

Mechanical Energy

A type of kinetic energy associated with the position, or motion (such as walking or running), of an object.