In recognizing a decline in the fair value of short-term stock investments, an Unrealized Loss account is debited because
A) management intends to realize this loss in the near future.
B) the securities have not been sold.
C) the stock market is volatile.
D) management cannot determine the exact amount of the loss in value.

Question

Quizplus · Accepted Answer

The Unrealized Loss account is used to record a decline in the fair value of short-term stock investments that have not been sold. This account is used to reflect the reduction in value of the investment and is treated as a holding loss until the securities are sold. The other answer choices do not accurately describe why the Unrealized Loss account is debited.

In Recognizing a Decline in the Fair Value of Short-Term