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

question 86

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) market value of the long-term investment
• C) 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
• D) lower-of-cost-or-market value of the long-term investment

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Definitions:

Normal Rate

Typically refers to a baseline or standard rate of interest, production, or growth that is considered usual or expected under normal circumstances.

Minimum Efficient Scale

The smallest level of production at which a firm can achieve the lowest long-run average total cost.

Economic Costs

The total cost of choosing one action over another, comprising both the costs directly incurred and the opportunity costs forgone by not taking the alternative action.

Total Revenue

The total amount of money received by a company from its sales of goods or services before any expenses are subtracted.