Rye Company Purchased 15% of Lena Company's Common Stock During

question 14

Multiple Choice

Rye Company purchased 15% of Lena Company's common stock during 2014 for $150,000. The 15% investment in Lena had a $160,000 fair value at the end of 2014 and a $140,000 fair value at the end of 2015. Which of the following statements is correct if Rye classifies the investment as a trading security?

• A) The 2014 unrealized gain is $10,000 and is included in Lena's 2014 net income.
• B) The 2015 unrealized loss is $20,000, but is not included in Lena's 2015 net income.
• C)The 2015 unrealized loss is $10,000 and is included in Lena's 2015 net income.
• D)The 2014 unrealized gain is $10,000 and is reported on Lena's balance sheet as a component of other comprehensive income.

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Definitions:

Government Quota

A limit set by the government on the quantity of a good that can be produced or imported, often used to protect domestic industries.

Quantity Control

Regulatory measures or policies used to limit the amount of a good or service that is produced or sold in a market.

Medicare Reimbursement

The payments made by the Medicare program to healthcare providers for services rendered to Medicare beneficiaries, based on predetermined rates.

Minimum Wage

The lowest hourly, daily, or monthly remuneration that employers may legally pay to workers, aimed at protecting the earning ability of workers.