An Unrealized Gain on an Equity Security When the Investor

question 57

Multiple Choice

An unrealized gain on an equity security when the investor has insignificant influence:

• A)is recorded when an investment is sold for more than its cost.
• B)is recorded when an investment is sold for less than its cost.
• C)is recorded when the fair market value of the investment is more than its cost,but it has not been sold.
• D)is recorded when the fair market value of the investment is less than its cost,but it has not been sold.

---

Definitions:

Incorporate

To incorporate is to legally form a corporation by filing required documents with a governmental entity, granting the company distinct legal status from its owners.

Unlimited Liability

The liability of the sole proprietor or the partners for all debts incurred by the business to the extent of their personal resources.

Sole Proprietorship

A business owned and operated by a single individual, where there is no legal distinction between the owner and the business entity.

Incorporated

A legal process whereby a business entity is formed as a distinct legal entity, separate from its owners, with its own rights and liabilities.