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Gain on Sale of Equity Method Investments

Brian Krogol
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Alright. So now that we found the ending balance in our investment which was right here, right? We found our ending balance to be one million, 266,000. We can compare that to our selling price to see if we had a gain or a sales gain or a loss on the sale. So the company is gonna report a gain on the sale if the selling price is greater than the book price right? Greater than the book value of the investment. So if the selling price is greater than the book value, well, we have a gain right, it was on our books for a certain amount and we sold it for more than that amount. So let's look at this on january 2nd year three big old company sold its investment in small boy company for 1,400,000. So there we go, 1,400,000 is the selling price. So how much cash are we gonna receive? 1,400,000. So we're gonna debit cash for 1,400,000. And now we have to get the investment off of our books, it had a debit balance as we see from the t account of 1,266,000. Well, we're gonna use a credit to get rid of it. Right? So we're going to credit our our investment asset equity method investment 4 1,266,000. And guess what the difference is the difference is the gain on the sale, right? This gain on the sale is going to our income statement gain on sale of investment Is gonna be on our income statement. And what amount is that gonna be? It's just the difference between these two numbers, right? 1,400,000 -1266000. We had a $134,000 gain on the sale of this investment. Right? So nothing too crazy. This is very similar to when we sell any sort of asset, we need to get the asset off of our books, we're gonna receive some cash and then we have to plug in the gain or the loss depending on the difference between the numbers. Okay, So if we look on our On our balance sheet, how is this gonna affect assets, liabilities and equity? Well, cash is going to increase by 1,400,000. Our investment is now gone. The equity method investment Is going to decrease by 1,266,000. So there was a net increase in our assets there by the same amount of the gain. The game is 100 and 34,000. So our equity increased and our assets increased by that amount. Cool, alright, let's pause and we'll do the loss on the investment