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:

Phonetic Similarity

The degree to which sounds are perceived as similar based on their acoustic properties, impacting language processing and memory.

Sensorimotor Stage

The first of Piaget’s stages, which lasts from birth to about 2 years of age, when infants construct an understanding of the world by coordinating sensory experiences (such as seeing and hearing) with motoric actions.

Cognitive Development

Involves the growth and change in intellectual capabilities, such as thinking, reasoning, and understanding, through childhood and adolescence into adulthood.

Piaget

A Swiss psychologist known for his pioneering work in child development, focusing on how children acquire knowledge and their stages of cognitive development.