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

question 139

Multiple Choice

A gain or loss on the sale of a long-term investment using the equity method is calculated by taking the difference between cash received and:

• A) cost of the long-term investment, adjusted by the investees net income, net loss and cash dividends, while the investment was held by the investor.
• B) lower-of-cost-or-market value of the long-term investment.
• C) cost of the long-term investment.
• D) market value of the long-term investment.

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Definitions:

Debt-Equity Ratio

A measure of a company's financial leverage, calculated by dividing its total liabilities by shareholders' equity.

Capital Projects

Large, long-term investments undertaken by a company or government to create, expand, or improve physical assets such as buildings, infrastructure, or equipment.

Total Assets

The sum of all assets owned by a company, including both current and non-current assets, as reported on the balance sheet.

Stock Repurchase

A company's buyback of its own shares from the marketplace, usually to increase the value of remaining shares by reducing supply.