If the Fair Value of a Debt Investment That Is

question 26

Multiple Choice

If the fair value of a debt investment that is classified as an available-for-sale investment declines for a reason that is viewed as "other than temporary" because it is viewed as "more likely than not" that the investor will be required to sell the investment prior to recovering the amortized cost of the investment less any credit losses arising in the current year:

• A) The investment is not written down to fair value.
• B) The investment is written down to fair value, and the impairment loss is recognized in net income.
• C) The investment is written down to fair value, and the impairment loss is recognized in accumulated other comprehensive income.
• D) The investment is written down to fair value, and only the noncredit loss is included in net income.

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Definitions:

Merchant

An individual or business engaged in the wholesale or retail sale of goods or commodities.

Floor Sander

A power tool used for smoothing, preparing, or finishing floors by removing the top layer.

Home Repair

The process of fixing, upgrading, or maintaining various elements or systems within a residence.

Lessor

A property owner who allows others to use his or her property in exchange for payment.