Under GAAP, If a Company Has an Investment in the Stock

question 21

Multiple Choice

Under GAAP, if a company has an investment in the stock of another company, which it is holding as a long-term investment, and the value of this investment rises during the year:

• A) No gain is recorded. The investment is carried at historical cost.
• B) The value of the asset on the balance sheet is increased, but no gain is recorded, either in net income or in other comprehensive income.
• C) A gain is recognized as part of the net income, and the value of the asset on the balance sheet is increased.
• D) A gain is recognized as part of other comprehensive income, and the value of the asset on the balance sheet is increased.

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Definitions:

Rohypnol

A potent sedative drug that is part of the benzodiazepine class, often associated with instances of drug-facilitated sexual assault.

Ketamine

A powerful medication primarily used for anesthesia but also studied for its effects on treating depression.

Anesthetic

A substance that causes loss of sensation or consciousness, used to prevent pain during surgeries and medical procedures.

Hallucinogenic

Substances that cause hallucinations - perceptions of objects, sounds, or sensations that seem real but are not.