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sveticcg [70]
3 years ago
6

On August 1, ABC Company sold its investment in Teal Company for $12,400. On the previous balance sheet, the investment had a fa

ir value of $11,400. The journal entry to record the sale will include a
Business
1 answer:
VladimirAG [237]3 years ago
5 0

Answer:

The journal entry to record the sale will include a,

<em>Cash $12,400 (debit)</em>

<em>Profit and Loss $1,000 (credit)</em>

<em>Investment in Teal Company $11,400 (credit)</em>

Explanation:

The Investment is carried in the the Financial statement at its Fair Value of $11,400, and this needs to be eliminated following the sale.

Recognize the cash proceeds following the sale of investment of $12,400.

Lastly any amount paid in excess of the Fair Value of the Investment must be recognized as profit or as loss (if fair value exceeds the cash proceeds)

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