When accounting for investments in trading securities,any decline in fair value below the cost of the investments is reported in which of the following ways?
A)On the income statement as a realized loss.
B)On the income statement as an unrealized holding loss.
C)On the balance sheet as a realized loss.
D)On the balance sheet as an unrealized holding loss in the stockholders' equity section.

Question

Quizplus · Accepted Answer

When accounting for investments in trading securities, any decline in fair value below the cost of the investments is reported on the income statement as an unrealized holding loss. This is because trading securities are considered to be held for the purpose of short-term trading, and any changes in their fair value are viewed as temporary fluctuations that do not affect the long-term viability of the investment. As such, any losses or gains from changes in fair value are not considered to be realized until the security is actually sold.

When Accounting for Investments in Trading Securities,any Decline in Fair