On September 15,Nolan Company purchases 2,000 shares of Francis Company common stock for $30,000,including $500 of commissions and brokerage fees.This is Nolan's first and only purchase of this type of investment.On November 1,Nolan sold 500 shares of the Francis Company stock for $8,200.On December 31,the fair value of Francis Company common stock was $16 per share.The journal entry to record the sale of stock on November 1 is:
A)Debit Cash,$8,200; Credit Stock Investments - Francis Company,$7,375; Credit Unrealized Gain - Income,$825.
B)Debit Cash,$8,200; Credit Stock Investments - Francis Company,$7,500; Credit Unrealized Gain - Income,$700.
C)Debit Cash,$8,200; Credit Stock Investments - Francis Company,$7,375; Credit Gain on Sale of Stock Investments,$825.
D)Debit Cash,$8,200; Credit Stock Investments - Francis Company,$7,500; Credit Gain on Sale of Stock Investments,$700.
E)Debit Cash,$8,200; Credit Stock Investments - Francis Company,$8,200.

Question

Quizplus · Accepted Answer

The initial cost of each share is calculated by dividing the total purchase cost ($30,000) by the number of shares purchased (2,000), resulting in a cost of $15 per share. Selling 500 shares at $15 each equals a cost of $7,500. The sale proceeds were $8,200, so the gain on sale is $8,200 - $7,500 = $700. Therefore, the correct entry debits Cash for the sale proceeds, credits Stock Investments for the cost of the shares sold, and credits Gain on Sale of Stock Investments for the gain realized.

On September 15,Nolan Company Purchases 2,000 Shares of Francis Company