Stock Categorized as Trading Securities Is Purchased for $52,000

question 89

Multiple Choice

Stock categorized as trading securities is purchased for $52,000.At year end,when the market value of the stock is $61,000,the balance of the Short-Term Investments account appearing on the balance sheet will be

• A)$9,000
• B)$52,000
• C)$61,000
• D)none of these

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Definitions:

WACC

Weighted Average Cost of Capital, a calculation that reflects the average rate of return a company is expected to pay to all its security holders.

After-Tax Value

The value of a transaction or investment after all taxes have been deducted.

Capital Structure

Refers to the blend of debt, equity, and other financing sources used by a company to fund its operations and growth endeavors.

Retained Earnings

The portion of net earnings not paid out as dividends but retained by the company to reinvest in its core business or to pay debt.