The journal entry to record the sale of an investment includes a loss on sale of investment for $500.The income statement will reflect:

Question

Quizplus · Accepted Answer

The entry to record the sale of an investment includes a loss, which is considered a non-operating item and should be recorded as other income/loss. The loss reduces the overall value of the investment and therefore the shareholders' equity, but that is not the account that should be affected in this specific entry. The sale of an investment does impact asset accounts, as the investment account decreases and cash account increases, but there is also a loss that needs to be specifically accounted for with the other income/loss account. The sale of an investment has no impact on net sales.

The Journal Entry to Record the Sale of an Investment