If the Cost of a Trading Investment Exceeds Its Fair

question 54

Multiple Choice

If the cost of a trading investment 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 an loss account that appears in the other expenses section of the income statement.

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Definitions:

Occupations

Refers to various jobs or professions that individuals engage in to earn income and contribute to the economy.

Elasticity Coefficient

A numerical measure of the responsiveness of the quantity demanded or supplied of a good or service to a change in one of its determinants, such as price.

Elastic

Describes a situation in economics where the demand for a product or service significantly changes in response to a price change.

Substitution Effect

The change in consumption resulting from a change in the relative prices of goods, leading consumers to substitute one good for another.