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Question:

For which of the following balance sheet items is a change in market value most likely to affect net income?

A Securities held with the intent to profit over the short term.
explanation

Securities held with the intent to profit over the short term are classified as trading securities, and changes in their market values are reflected in their balance sheet values and also reported on the income statement. Debt securities issued by the firm, and debt securities that the firm intends to hold until-maturity, are both* reported at amortized cost, not market value. Debt and equity securities that the firm does not expect to hold to maturity or to sell in the near term are marked to market on the balance sheet, but unrealized gains and losses do not affect the income statement.

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