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:

Question

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- The original cost of the 5,000 shares is $59,500 + $1,000 broker's fee = $60,500.
- 60% of the investment is 3,000 shares (5,000 shares * 60%)
- The carrying value of the 3,000 shares is 3,000/25,000 * total carrying value = $36,300 (where total carrying value is 5,000 shares * cost per share = $12.10 per share)
- The proceeds from the sale is $39,000, which is higher than the carrying value of $36,300. Therefore, there is a loss on sale of investment.
- The loss on sale of investment is proceeds - carrying value - broker's fee = $39,000 - $36,300 - $880 (broker's fee for selling) = $8,880
- The journal entry would be: debit Cash $39,000, debit Loss on Sale of Investment $8,880, credit Long-Term Investments $47,880.

On January 4,Year 1,Barber Company Purchased 5,000 Shares of Convell