In April, 2018, Norman Industries Sold Available-For-Sale Debt Securities That

Multiple Choice

In April, 2018, Norman Industries sold available-for-sale debt securities that cost $470,000 and received a check from its broker for $793,000. When the check was deposited, the accounting clerk debited cash and credited Available-for-Sale Debt Investments for the full amount. The CFO questioned the entry in December, 2018. If this is an error, what is the proper correcting entry? (Tax rate is 40%.)

A) $$\begin{array} { | c | r | r | } \hline \text { Available-for-Sale Debt Investments } & 323,000 & \\\hline \text { Realized Gain } & & 323,000 \\\hline\end{array}$$
B) $$\begin{array} { | l | r | r | } \hline \text { Available-for-Sale Debt Investments } & 793,000 & \\\hline \text { Realized Gain } & & 323,000 \\\hline \text { Retained Earnings-Prior Period Adj. } & & 470,000 \\\hline\end{array}$$
C) $$\begin{array} { | c | r | r | } \hline \text { Available-for-Sale Debt Investments } & 323,000 & \\\hline \text { Income Tax Expense } & & 129,200 \\\hline \text { Retained Earnings } & & 193,800 \\\hline\end{array}$$
D) $$\begin{array} { | l | r | r | } \hline \text { Realized Gain } & 323,000 & \\\hline \text { Available-for-Sale Debt Investments } & & 323,000 \\\hline\end{array}$$