When a loss is recorded on the sale of a significant interest investment,________.

Question

Quizplus · Accepted Answer

A loss on the sale of a significant interest investment indicates that the selling price was lower than the carrying value of the investment, which means that the asset was overvalued on the balance sheet. Therefore, when the investment is sold, total assets will decrease by the amount of the loss. Equity will also decrease by the same amount, as the loss will be reflected in the income statement and reduce net income, which in turn reduces retained earnings and thus, equity.

When a Loss Is Recorded on the Sale of a Significant