On February 19, 2012, Jose Inc

question 29

Multiple Choice

On February 19, 2012, Jose Inc. acquired 18,000 shares of Luis Corporation stock at $45 per share. Jose has 50,000 shares outstanding. On December 31, 2012, Luis common stock had a closing market price of $26 per share. Assuming that the decline in market price is considered to be temporary, at December 31, Luis would

• A) Make an adjusting entry, including a debit to Unrealized Loss on Equity Method Securities of $342,000
• B) Make an adjusting entry, including a credit to Market Adjustment on Equity Method Securities of $468,000
• C) Make an adjusting entry, including a credit to Investment in Luis Stock of $342,000
• D) Do nothing; an adjusting entry is not required

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Definitions:

Stimulus Discrimination

The learned ability to differentiate between similar stimuli and respond only to the original stimulus in conditioning.

Extinction

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

Systematic Desensitization

Therapy technique that involves exposing a client to increasingly anxiety-producing stimuli or situations while having the client relax at the same time.

Counterconditioning

A behavior therapy technique that involves pairing a stimulus that elicits an undesirable response with a new response that is incompatible with the undesirable response.