At the End of the First Year of Operations, the Total

question 116

Multiple Choice

At the end of the first year of operations, the total cost of the trading debt securities portfolio is $245,000. Total fair value is $250,000. The financial statements should show

• A) an addition to an asset of $5,000 and a realized gain of $5,000.
• B) an addition to an asset of $5,000 and an unrealized gain of $5,000 in the stockholders' equity section.
• C) an addition to an asset of $5,000 in the current assets section and an unrealized gain of $5,000 in "Other revenues and gains."
• D) an addition to an asset of $5,000 in the current assets section and a realized gain of $5,000 in "Other revenues and gains."

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Definitions:

Liquidity

The measure of how easily assets can be converted into cash with little impact on their value; crucial for the smooth operation of financial markets.

Smaller Corporation

A smaller-sized company with lower revenue and fewer employees compared to larger corporations within the same industry.

Call Premium

The amount by which the call price of a bond or preferred stock exceeds its face value or issue price.

Par Value

The face value of a bond or stock as stated by the issuing company, typically not indicative of market value.