A Short-Term Investment Acquired for $23,200 Has a Year-End Market

question 84

Multiple Choice

A short-term investment acquired for $23,200 has a year-end market value of $25,000.The adjusting entry involves a:

• A) debit to Unrealized Loss on Fair-Value Adjustment for $1,800
• B) debit to Short-Term Investments for $1,800
• C) credit to Unrealized Gain on Fair-Value Adjustment for $1,800
• D) credit to Short-Term Investments for $1,800

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Definitions:

Floating-Rate Loan

A loan with an interest rate that adjusts periodically based on a reference interest rate index, reflecting changes in market interest rates.

Savings And Loan Industry

A segment of the financial industry focused on accepting savings deposits and making mortgage and other loans to individuals and businesses.

Interest Rates

The amount charged, expressed as a percentage of principal, by a lender to a borrower for the use of assets.

Interest Rate Swap

A financial derivative contract in which two parties agree to exchange one stream of interest payments for another, based on a specified principal amount.