If the Cost of an Available-For-Sale Security Exceeds Its Fair

question 136

Multiple Choice

If the cost of an available-for-sale security exceeds its fair value by $29,000, 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 valuation allowance account that appears in the stockholders' equity section of the balance sheet.
• D) will show a debit to an unrealized loss account that is deducted in the stockholders' equity section of the balance sheet.

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Definitions:

Infinitely Repeated Games

A concept in game theory where a game is played an unlimited number of times, allowing for strategies that can enforce cooperation in situations where one-time game theory would predict non-cooperation.

Credible Threat

A declaration or signal that one will take some negative action if conditions are not met, and it is believable and capable of being executed.

Oligopolistic Situation

A market condition where a few companies have the majority of market share and control over pricing.

Barriers to Entry

Factors that make it difficult for new firms to enter a market, often leading to reduced competition.