On January 4,2011,Larsen Company Purchased 5,000 Shares of Warner Company

question 61

Multiple Choice

On January 4,2011,Larsen Company purchased 5,000 shares of Warner Company for $59,500 plus a broker's fee of $1,000.Warner Company has a total of 25,000 shares of common stock outstanding and it is presumed the Larsen Company will have a significant influence over Warner.During each of the next two years,Warner declared and paid cash dividends of $0.85 per share.Its net income was $72,000 and $67,000 for 2011 and 2012,respectively.The January 12,2013,entry to record the sale of 3,000 shares of Warner Company stock for $39,000 cash should be:

• A) \[\begin{array} { | l | c | l | }
• \hline \text { Cash } \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots & 39,000 & \\
• \hline \text { Loss on Sale of Investments } \ldots \ldots \ldots \ldots \ldots & 2,400 & \\
• \hline \quad \text { Long-Term Investments } \ldots \ldots \ldots \ldots \ldots & & 41,400 \\
• \hline
• \end{array}\]
• B) \[\begin{array} { | l | c | l | }
• \hline \text { Cash } \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots & 39,000 & \\
• \hline \text { Loss on Sale of Investments } \ldots \ldots \ldots \ldots \ldots & 8,800 & \\
• \hline \quad \text { Long-Term Investments } \ldots \ldots \ldots \ldots \ldots & & 47,880 \\
• \hline
• \end{array}\]
• C) \[\begin{array} { | l | c | l | }
• \hline \text { Cash } \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots & 39,000 & \\
• \hline \text { Loss on Sale of Investments } \ldots \ldots \ldots \ldots \ldots & 60 & \\
• \hline \quad \text { Long-Term Investments } \ldots \ldots \ldots \ldots \ldots & & 38,940 \\
• \hline
• \end{array}\]
• D) \[\begin{array} { | l | c | l | }
• \hline \text { Cash } \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots & 39,000 & \\
• \hline \quad \text { Gain on Sale of Investments } \ldots \ldots \ldots \ldots \ldots && 8,750 \\
• \hline \quad \text { Long-Term Investments } \ldots \ldots \ldots \ldots \ldots & & 30,250 \\
• \hline
• \end{array}\]
• E) \[\begin{array} { | l | c | l | }
• \hline \text { Cash } \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots & 39,000 & \\
• \hline \text { Loss on Sale of Investments } \ldots \ldots \ldots \ldots \ldots & 21,500 \\
• \hline \quad \text { Long-Term Investments } \ldots \ldots \ldots \ldots \ldots & & 60,500 \\
• \hline
• \end{array}\]

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