Lyrical Company Purchased Equity Securities for $500,000 and Classified Them

question 100

Multiple Choice

Lyrical Company purchased equity securities for $500,000 and classified them as trading securities on September 15, 2014. On December 31, 2014, the current fair value of the securities was $481,000. How should the investment be reported within the 2014 financial statements?

• A) The investment in trading securities would be reported in the balance sheet at its $481,000 fair value.
• B) The investment in trading securities would be reported in the balance sheet at its $500,000 cost.
• C)A realized holding loss on the trading securities would be reported on the income statement.
• D)The investment in trading securities would be reported in the balance sheet at its $481,000 fair value and a realized holding loss on the trading securities would be reported on the income statement.

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Definitions:

Systematic Desensitization

A behavioral therapy technique used to reduce phobic responses and anxiety through gradual exposure to the feared stimulus while practicing relaxation techniques.

Extinction

In psychology, the gradual weakening and disappearance of a conditioned response when the conditioned stimulus is no longer paired with the unconditioned stimulus.

Conditioned Response

A learned response to a previously neutral stimulus that has been repeatedly presented along with an unconditioned stimulus.

Spontaneous Recovery

A phenomenon in psychology where previously extinguished responses re-emerge after a pause without further conditioning.