Which entry depicts the sale of 400 shares Harris Corp. common stock for 6300 cash less...

Which entry depicts the sale of 400 shares Harris Corp. common stock for 6300 cash less fees $600. The original purchase of the shares was for $5000 less fees for $400

Cash xxx

C/S investment. xxx

Gain on sale on C/S. xxx

Expert Solution

When a company sells an investment, it results in a gain or loss which is recognized in income statement. A gain on sale of investment arises when the (disposal) value of an investment exceeds its cost. Similarly, a capital loss is when the value of investment drops below its cost.

Accounting treatment of a disposal of investment depends on:

the nature of the investment i.e. whether it is a share of common stock, preferred stock, a bond, etc.,
the extent of the investment i.e. the percentage holding, and
the initial recognition and continuing accounting of the investment.

Investments in shares of common stock are accounted for using either the fair value through profit and loss, fair value through other comprehensive income, equity method or consolidation depending on the extent of ownership.

Journal Entry for sale of an investment:-

Particulars	Debit	Credit
Cash	6,300
Sale of Investment		5,000
Gain on Sale of Investment		1,300

ekkarill92 answered 2 years ago

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