A gain or loss on sale of a long-term investment using the equity method is determined by comparing the cash received with the:

Question

Quizplus · Accepted Answer

When using the equity method, the investor records its share of the investee's net income and dividends received. Thus, the cost of the investment is adjusted for these amounts. The gain or loss on the sale of the investment is determined by comparing the cash received with this adjusted cost. The market value or lower-of-cost-or-market values are not relevant for determining the gain or loss on the sale of the investment using the equity method.

A Gain or Loss on Sale of a Long-Term Investment