When the market value of a company's temporary investments is less than its cost, the difference is:
A)not recognized in the financial statements.
B)only disclosed in the financial statement footnotes.
C)reported as a loss on the balance sheet.
D)reported as an unrealized loss on the income statement.

Question

Quizplus · Accepted Answer

When the market value of a company's temporary investments is less than its cost, the difference is reported as an unrealized loss on the income statement. This reflects the decrease in value of the investment, but does not represent an actual realized loss until the company decides to sell the investment. Therefore, it is recognized on the income statement as an unrealized loss rather than a realized loss.

When the Market Value of a Company's Temporary Investments Is