In Year 2, ABC Corp.acquired a 15% interest in XYZ, Inc., for $50,000.During the year, XYZ paid dividends of $10,000 and had net income of $30,000.ABC sold the shares of XYZ for $65,000 cash.What entry will ABC make to record the sale?

Question

Quizplus · Accepted Answer

To record the sale of the investment in XYZ, ABC Corp. would debit Cash for $65,000, credit Investment in XYZ for $50,000 (to remove the investment from the books), and credit Gain on Sale for $15,000 (which is the difference between the selling price and the carrying amount of the investment). Therefore, the correct entry is:
Cash 65,000 
Gain on Sale 15,000
Investment in XYZ 50,000