National financial services, inc. invested $ 15,000 to acquire 5,000 shares of stonebridge investments, inc. on march 15, 2015. this investment represents less than 20% of the investee's voting stock. on may 7, 2018, national financial services, inc. sells 2,500 shares for $ 20,250. when the journal entry to record the sale is made,
a. gain on disposal will be credited
b. loss on disposal will be debited
c. equity investments will be debited
d. cash will be credited

a. Gain on Disposal will be credited

Explanation:

For recording this sale, first we have to determine the per share selling price and purchase price which is shown below:

Purchase price would be

= Invested amount ÷ number of shares acquired

= $15,000 ÷ 5,000 shares

= $3

Now the sale price would be

= Sales amount ÷ number of shares acquired

= $20,250 ÷ 2,500 shares

= $8.1

Since the selling price is more than the purchase price which would reflect the gain and the gain part is always credited

answer; according to the ( irs );

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