A purchase of common stock of Blue Wave Corporation for $29,000 was sold three months later for $30,000. The entry to record the sale would include a
A) debit to Cash of $29,000.
B) credit to Gain on Sale of Stock Investments of $1,000.
C) credit to Stock Investments of $30,000.
D) credit to Interest Revenue of $1,000.

Question

Quizplus · Accepted Answer

The sale of the common stock for $30,000 represents a gain of $1,000 ($30,000 - $29,000). The entry to record the sale would include a credit to Gain on Sale of Stock Investments for $1,000, representing the amount of gain realized from the sale. There would also be a debit to the Stock Investments account for $29,000, representing the original cost of the investment, and a credit to Cash for $30,000, representing the proceeds received from the sale. Option A is incorrect because a debit to Cash would only be made if there was a decrease in cash. Option C is incorrect because a credit to Stock Investments would not reflect the sale of the investment. Option D is incorrect because Interest Revenue would not be applicable in this scenario.

A Purchase of Common Stock of Blue Wave Corporation for $29,000