When an investor sells shares of its investee company, which of the following statements is true?

Question

Quizplus · Accepted Answer

When an investor sells shares of its investee company, a recognized gain or loss is reported as the difference between selling price and carrying value, which is the value at which the investment is recorded in the investor's books. The original cost is no longer relevant when calculating the gain or loss on the sale of the investment. Option A is incorrect because it states "recognized" gain or loss, but then uses the original cost which is not how recognized gain or loss is calculated. Option B is incorrect because it states "unrecognized" gain or loss, which is not relevant when the investment is sold. Option D is incorrect because it also states "unrealized" gain or loss, which is not relevant when the investment is sold. Option E is incorrect because any gain or loss is reported as part of net income or loss, not comprehensive income.

When an Investor Sells Shares of Its Investee Company, Which