On January 4, Year 1, Barber Company purchased 5,000 shares of Convell Company for $59,500 plus a broker's fee of $1,000. Convell Company has a total of 25,000 shares of common stock outstanding and it is presumed the Barber Company will have a significant influence over Convell. During each of the next two years, Convell declared and paid cash dividends of $0.85 per share, and its net income was $72,000 and $67,000 for Year 1 and Year 2, respectively. The January 12, Year 3, entry to record Barber's sale of 3,000 shares of Convell Company stock, which represents 60% of Barber's total investment, for $39,000 cash should be:
A. Debit Cash $39,000; debit Loss on Sale of Investment $8,880; credit Equity Method Investments $47,880.
B. Debit Cash $39,000; debit Loss on Sale of Investment $21,500; credit Equity Method Investments $60,500.
C. Debit Cash $39,000; credit Gain on Sale of Investment $2,700; credit Equity Method Investments $36,300.
D. Debit Cash $39,000; credit Gain on Sale of Investment $8,750; credit Equity Method Investments $30,250.
E. Debit Cash $39,000; debit Loss on Sale of Investment $8,200; credit Equity Method Investments $47,280.
Answer: A
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