D105 Intermediate Accounting 3 PA 1 Multiple Choice Q’s with correct answers
marked in yellow 2025 Western Governors University
D105 PA 1 Multiple Choice Q’s
1. A company reported its investments in trading securities on its December
31, Year 1 balance sheet. The original cost of the trading securities was
$500,000, with a fair value of $475,000. On December 31, Year 2, the fair
value of the securities was $467,500.
Which amount should the company report on its Year 2 income statement
as a result of the decrease in fair value of the investments at the end of
Year 2?
• Unrealized loss of $32,500
• Realized loss of $7,500
• Realized loss of $32,500
• Unrealized loss of $7,500
2. A company has securities which they intend to hold until their
maturity dates.
Which valuation should be used to record these securities?
• Net realizable value
• Amortized cost
• Cost
• Fair value
3. Which debt security is purchased with the intent to sell within three
months to generate income on short-term price differences?
• Held-to-maturity
• Trading
• Available-for-sale
• Warrant
4. How should a reclassification adjustment be reported?
• Current liability
• Income statement as other revenue
• Retained earnings
• Notes to financial statements
5. The following investment in equity securities is reported on the
December 31, Year 1, balance sheet for a company:
, Cost: $370,000
Fair Value: $380,000
marked in yellow 2025 Western Governors University
D105 PA 1 Multiple Choice Q’s
1. A company reported its investments in trading securities on its December
31, Year 1 balance sheet. The original cost of the trading securities was
$500,000, with a fair value of $475,000. On December 31, Year 2, the fair
value of the securities was $467,500.
Which amount should the company report on its Year 2 income statement
as a result of the decrease in fair value of the investments at the end of
Year 2?
• Unrealized loss of $32,500
• Realized loss of $7,500
• Realized loss of $32,500
• Unrealized loss of $7,500
2. A company has securities which they intend to hold until their
maturity dates.
Which valuation should be used to record these securities?
• Net realizable value
• Amortized cost
• Cost
• Fair value
3. Which debt security is purchased with the intent to sell within three
months to generate income on short-term price differences?
• Held-to-maturity
• Trading
• Available-for-sale
• Warrant
4. How should a reclassification adjustment be reported?
• Current liability
• Income statement as other revenue
• Retained earnings
• Notes to financial statements
5. The following investment in equity securities is reported on the
December 31, Year 1, balance sheet for a company:
, Cost: $370,000
Fair Value: $380,000
