Orange Company Purchased a Trading Investment That Had a Carrying

question 136

Multiple Choice

Orange Company purchased a trading investment that had a carrying amount of $35,000 when they decided to sell it. Orange purchased the investment for $31,000. If Orange Company sold this investment for $43,000, Orange will have a(n) :

• A) realized gain of $12,000.
• B) realized gain of $8,000.
• C) an unrealized loss of $3,000
• D) an unrealized gain of $11,000.

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Definitions:

UCC

The Uniform Commercial Code, a comprehensive set of laws governing all commercial transactions in the United States.

Secured Interests

A legal claim or right a lender has on the borrower's collateral in case they default on the loan.

Priority in Time

A legal principle that grants precedence to rights or claims established earlier in time over those established later.

Securitization

The process of converting assets, usually illiquid ones, into marketable securities, thereby enhancing liquidity and often reducing risk.