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

question 20

Multiple Choice

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

• A) cost of the long-term investment
• B) cost of the long-term investment adjusted for the investor's share of the investee's net income and cash dividends while the investment was held by the investor company
• C) lower-of-cost-or-market value of the long-term investment
• D) market value of the long-term investment

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Definitions:

Capital Account

A national account that shows the net change in asset ownership for a country. It includes foreign investments and loans.

Financial Account

A component of the balance of payments that records transactions of financial assets between residents of one country and the rest of the world.

Exchange Rate

The price of one currency in terms of another, allowing for the conversion of monetary values between countries.

Demand for Currency

The desire or need for holding cash as opposed to other forms of wealth or assets.