National Financial Services, Inc. invested $21,000 to acquire 6250 shares of Stone bridge Investments, Inc. on March 15, 2015. This investment represents less than 20% of the investee's voting stock. On May 7, 2018, National Financial Services, Inc. sells 3000 shares for $19,250. When the journal entry to record the sale is made, ________.
A) Gain on Disposal will be credited
B) Equity Investments will be debited
C) Cash will be credited
D) Loss on Disposal will be debited
A) Gain on Disposal will be credited
Explanation: Total value of 3000 shares at the purchase time $10,080
(3000 shares × $3.36*)
Cost of 3000 shares disposed of $19,250
Gain on Disposal $9170
* Cost per share = $21,000 / 6250 = $3.36
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