3 companies make a year end adjustment to trading investments to bring the account t 4306945

3 companies make a year end adjustment to trading investments to bring the account t 4306945

3) Companies make a year-end adjustment to trading investments to bring the account to historical value.

4) Realized gains or losses occur when a company adjusts an investment to fair value but have not yet disposed of the investment.

5) The unrealized holding gains and losses on available-for-sale investments are reported on the income statement.

6) The unrealized holding gains and losses on available-for-sale investments are recorded as an adjustment to the Unrealized Holding Gain—Available-for-Sale account or Unrealized Holding Loss—Available-for-Sale account.

7) Which of the following is true of trading investments?

A) They are held for more than two years.

B) They are always recorded at the current market value.

C) They must be adjusted and reported at fair value at the end of each period.

D) They are always recorded at the historical cost.

8) The fair value of an investment is the price:

A) at the time of acquisition of the investments.

B) that would be used if the company were to sell the investments on the market.

C) that is always equal to the weighted average cost of the investment.

D) that is equal to the average cost of the investment during the holding period.

9) Unrealized gains or losses on available-for-sale securities occur when a company:

A) adjusts an asset to fair value but has not yet disposed of the asset.

B) adjusts an asset to fair value when an asset is disposed.

C) adjusts an asset to average value but has not yet disposed of the asset.

D) adjusts an asset to average value when an asset is disposed.

10) Unrealized holding gains or losses on trading investments are reported in the ________ section of the income statement.

A) Current Assets

B) Other Revenues and Expenses

C) Fixed Assets

D) Minority Interest

11) When there is an unrealized loss on trading investments, the ________ will decrease.

A) total equity

B) cash

C) total liabilities

D) long term investments

12) Sinopia Corporation reported trading investments of $15,000 on December 31, 2015. The company realizes a decrease of $3,000 in the fair value of the trading investments by the end of the year 2016. Which of the following is the correct journal entry?

A)

Trading Investments

3,000

            Unrealized Holding Loss—Trading

3,000

B)

Unrealized Holding Loss—Trading

3,000

            Trading Investments

3,000

C)

Unrealized Holding Loss—Trading

3,000

            Fair Value Adjustment—Trading

3,000

D)

Fair Value Adjustment—Trading

3,000

            Unrealized Holding Loss—Trading

3,000

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