Trading Securities Purchased in 2010 for $85,000 Were Valued at $80,000

question 55

Multiple Choice

Trading securities purchased in 2010 for $85,000 were valued at $80,000 on December 31, 2010. The securities were sold at the beginning of 2011 for $83,000. The 2011 income statement should report a(n) :

• A)realized loss of $2,000.
• B)realized gain of $3,000.
• C)unrealized loss of $5,000 and a realized gain of $3,000.
• D)unrealized gain recovered of $3,000.

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Definitions:

Marginal Tax Rate

The rate of tax applied to the next dollar of taxable income, indicating the percentage of any additional income that will be taken as tax.

Average Tax Rate

The proportion of total income paid in taxes, calculated by dividing the total tax amount by the taxpayer's total income.

Taxable Income

The amount of an individual's or business's income used to calculate how much tax they owe to the government in a given year.

Total Tax

The annual sum of all taxes owed by an individual or corporation, including federal, state, and local taxes, regardless of deduction or credit eligibility.