QUESTION 4 Jax Company uses the acquisition method for accou

QUESTION 4 Jax Company uses the acquisition method for accounting for its investment in Saxton Company. Jax sells some of ts shares of Saxton such that neither control nor significant in fluence exists. Which of the following statements is true? O The difference between selling price and carrying value is recorded as an unrealized gain or loss. O The difference between selling price and acquisition value is recorded as a realized gain or loss O The difference between selling price O The difference between selling price and carrying value is O The difference between selling price and acquisition value is recorded as an unrealized gain or loss and carrying value is recorded as a realized gain or loss. as an adjustment to retained earnings.

Solution

Correct answer is option C. Difference between selling price & carrying value is recorded as realized gain or loss.

Since the acquisition method is used for recording investment & sale of share is such a way the neither control nor significance exist,we have to consider Carrying value of such investment & since threre is a real transaction,results will be realized one.