The equity in investee income is reduced to account for a permanent loss in value of an investment using the equity method. A loss is reported in the same manner as a loss in value of other long-term assets by reducing the investor's stockholders equity. No adjustment to cash is necessary to record a permanent loss in value for an equity method investment.

1. How should a permanent loss in value of an investment using the equity method be treated?
Multiple Choice The equity in investee income is reduced. A loss is reported in the same manner
as a loss in value of other long-term assets. The investors stockholders equity is reduced. No
adjustment is necessary. Record an offset to cash.