On June 1, 2015, Rock Corp.purchased Chan Corp.common shares for $9,300 as a trading investment.Three months later, Rock sold these shares for $10,000.The entry to record the sale would include a
A)debit to Cash of $9,300.
B)credit to Interest Revenue of $700.
C)credit to Trading Investments of $10,000.
D)credit to Realized Gain on Trading Investments of $700.

Question

Quizplus · Accepted Answer

Since the shares were purchased as a trading investment, any gain or loss resulting from the sale is recognized in the income statement as a realized gain or loss on trading investments. Therefore, the entry to record the sale would include a credit to Realized Gain on Trading Investments of $700 ($10,000 selling price - $9,300 purchase price).