If the cost of an available-for-sale security exceeds its fair value by $40000 the entry to recognize the loss

A) is not required since the share prices will likely rebound in the long run.
B) will show a debit to an expense account.
C) will show a credit to a contra-asset account that appears in the stockholders' equity section of the balance sheet.
D) will show a debit to an unrealized loss account that is deducted in the stockholders' equity section of the balance sheet.

The entry to recognize the loss would involve debiting an unrealized loss account and crediting the available-for-sale security account. The unrealized loss account is a contra-asset account that is deducted in the stockholders' equity section of the balance sheet. Therefore, choice D is the correct answer. Choice A is incorrect because it assumes the share prices will rebound without any evidence. Choice B is incorrect because the loss is not an actual expense but a reduction in the value of an asset. Choice C is incorrect because there is no contra-asset account that appears in the stockholders' equity section of the balance sheet.