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:

Purely Competitive

A market structure characterized by a large number of small firms producing identical products, with no single firm able to influence the market price.

Marginal Revenue Product

Marginal Revenue Product measures the additional revenue generated from employing an extra unit of a resource.

Marginal Revenue Product

The additional revenue generated from using one more unit of a particular input, holding all other inputs constant.

Variable Input

Inputs or resources whose quantity can be changed in the short run to increase or decrease production.