If the cost of a trading investment exceeds its fair value by $40,000, the entry to recognize the loss
A) is not required since the share prices will likely rebound in the long run.
B) will show a debit to an expense account in the operating section of the income statement.
C) will show a credit to a contra-asset account that appears in the shareholders' equity section of the balance sheet.
D) will show a debit to an loss account that appears in the other expenses section of the income statement.

Question

Quizplus · Accepted Answer

The loss should be recognized in the income statement as an expense, specifically in the other expenses section, by debiting a loss account.

If the Cost of a Trading Investment Exceeds Its Fair