Question

If a short-term debt investment is sold, what happens to the debt investments account?

1) Increases
2) Decreases
3) Remains unchanged
4) Cannot be determined

Answer 1

When a short-term debt investment is sold, the debt investments account decreases, as the asset is removed from the company's balance sheet.

Step-by-step explanation:

If a short-term debt investment is sold, the debt investments account typically decreases. This is because the sale of the investment results in the removal of the asset from the company’s balance sheet. When the sale transaction is completed, the value of the investment is taken out of the debt investments account, and in return, the business receives cash or cash equivalents, which increases their cash or cash equivalents account.