What are the effects on the accounting equation from the recognition of an unrealized loss on trading securities?
A)Assets and stockholders' equity decrease.
B)No effects; unrealized gains and losses should not be recorded.
C)Assets and liabilities decrease.
D)Stockholders' equity decreases and liabilities increase.

Question

Quizplus · Accepted Answer

Recognition of an unrealized loss on trading securities will decrease the value of assets (due to the decrease in market value of the trading securities) and also decrease the value of stockholders' equity (due to decrease in the market value of trading securities being recorded on the income statement as an unrealized loss).

What Are the Effects on the Accounting Equation from the Recognition