If the Cost of an Investment Held for Trading Exceeds

question 109

Multiple Choice

If the cost of an investment held for trading exceeds its fair value by $ 40,000, 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 in the operating section of the income statement.
• C) will show a credit to a contra asset account that appears in the shareholders' equity section of the balance sheet.
• D) will show a debit to a holding gain or loss account that appears in the other expenses section of the income statement.

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Definitions:

Title Warranties

Legal guarantees provided by a seller that they have the right to transfer ownership and that the asset is free from liens or encumbrances.

UCC

The Uniform Commercial Code, a comprehensive set of laws governing all commercial transactions in the United States, including sales, negotiable instruments, and secured transactions.

Implied Warranty

A legal assumption that a product is fit for its intended purpose, even if not expressly stated by the seller.

Merchantability

A guarantee that a product will meet reasonable quality and performance standards for sale to customers.