The Following Information Is Related to the Marketable Security Investments

question 88

Multiple Choice

The following information is related to the marketable security investments of Solo Company. Securities held on December 31, 2016 are described in the table below.
$\begin{array}{|l|r|r|r|r|r|}\hline\text { Securities } &\text { No. of } & \text { Cost/Share } &\text { Total }& \text { ValuelShare }&\text { Total Market } \\&\text { Shares }&&\text { Cost }&&\text { Value }\\\hline \text { AAA } & 100 & \$ 29 & \$ 2,900 & \$ 34 & \$ 3,400 \\\hline \text { BBB } & 250 & 30 & 7,500 & 28 & 7,000 \\\hline \text { CCC } & 150 & 16 &2,400 & 20 & 3,000 \\\hline&&&\$12,800&&\$13,400\\\hline\end{array}$
During 2017, Solo received word that dividends of $$2.50 per share were declared, but not yet received on the 150 shares of CCC stock. The per-share market value of CCC on December 31, 2017, was $18. During 2018, Solo sold 150 shares of CCC for $22 per share.
The journal entry to record the sale of 150 shares of CCC stock in 2018 would include:

• A)A debit to Cash for $3,000.
• B)A debit to Unrealized Gain for $300.
• C)A debit to Unrealized Gain for $900.
• D)A credit to Gain on Sale of Investments for $600.

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Definitions:

Discount Lost

The expense incurred when a company fails to take advantage of the early payment discounts offered by suppliers.

Gross Method

An accounting method for recording purchases at the invoice's gross amount before any trade discounts are subtracted.

Net Method

A way to record purchases of inventory with a discount for early payment, where the purchase is recorded at the net of the discount and the discount is lost if not taken.

Net Approach Method

A pricing method where the net price after all discounts is shown in the invoice.