An Investor in Securities Accounted for by the Equity Method $\quad \$10,000$

question 40

Multiple Choice

An investor in securities accounted for by the equity method has the following information available at December 31,2012:
Market value of securities $\quad \$10,000$
Acquisition cost of securities $\quad \$8,000$
How does the investor report the change in market value on the securities at December 31,2012?

• A) adjustment to Investment account
• B) unrealized gain of $2,000 on income statement
• C) adjustment to " other comprehensive income" account
• D) not reported

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Definitions:

Home Currency

The currency in which a country conducts its principal economic activities and in which domestic financial statements are reported.

Exchange Rate Risk

The possibility of losing value in international financial transactions due to fluctuations in the currency exchange rates.

Manage Exchange Rate

Strategies or practices employed by individuals, businesses, or countries to mitigate or take advantage of fluctuations in exchange rates.

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The rate most international banks charge one another for overnight Eurodollar loans.