What should be recorded as the journal entry for the sale of Colorado Co. stock during 2026?

The correct answer involves recording the sale of Colorado Co. stock accurately by including the cash received, any loss incurred on the sale, and the appropriate adjustment to the investment account. When a stock is sold, the transaction typically encompasses several components:

1. Cash: This reflects the actual monetary amount received from the sale of the stock. It's crucial to record this amount because it indicates the inflow of resources as a result of the transaction.

2. Loss on Sale of Investments: If the stock was sold for less than its carrying amount (the amount originally recorded in the investment account), a loss must be recognized. This loss represents a decrease in value for the shareholder, which is an important aspect of the financial accounting principles, as it ensures that the financial statements accurately reflect the company's performance.

3. Equity Investments: This part of the entry involves reducing the investment account. When the stock is sold, it no longer represents an asset that the company owns; thus, the investment account must be decreased accordingly.

Combining these elements in the journal entry provides a complete picture of the transaction, highlighting both the cash inflow and the adjustments needed to the investment account, alongside recognizing any financial repercussions from the sale, thus adhering to the principles of financial reporting. This