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In April,2016,Norman Industries Sold Available-For-Sale Securities That Cost $450,000 and Received

Question 391

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In April,2016,Norman Industries sold Available-for-Sale securities that cost $450,000 and received a check from its broker for $793,000.When the check was deposited,the accounting clerk debited cash and credited investments for the full amount.The CFO questioned the entry in December,2016.If this is an error,what is the proper correcting entry? (Tax rate is 40%.)


A) In April,2016,Norman Industries sold Available-for-Sale securities that cost $450,000 and received a check from its broker for $793,000.When the check was deposited,the accounting clerk debited cash and credited investments for the full amount.The CFO questioned the entry in December,2016.If this is an error,what is the proper correcting entry? (Tax rate is 40%.) A) Gain on Sale of Investments 343,000 B) Gain on Sale of Investments 343,000 Retained Earnings-Prior Period Adj. 450,000 C) Income Tax Expense 137,200 Retained Earnings 205,800 D) AFS Investments 343,000 Gain on Sale of Investments 343,000
B) In April,2016,Norman Industries sold Available-for-Sale securities that cost $450,000 and received a check from its broker for $793,000.When the check was deposited,the accounting clerk debited cash and credited investments for the full amount.The CFO questioned the entry in December,2016.If this is an error,what is the proper correcting entry? (Tax rate is 40%.) A) Gain on Sale of Investments 343,000 B) Gain on Sale of Investments 343,000 Retained Earnings-Prior Period Adj. 450,000 C) Income Tax Expense 137,200 Retained Earnings 205,800 D) AFS Investments 343,000 Gain on Sale of Investments 343,000
Retained Earnings-Prior Period Adj. 450,000
C) In April,2016,Norman Industries sold Available-for-Sale securities that cost $450,000 and received a check from its broker for $793,000.When the check was deposited,the accounting clerk debited cash and credited investments for the full amount.The CFO questioned the entry in December,2016.If this is an error,what is the proper correcting entry? (Tax rate is 40%.) A) Gain on Sale of Investments 343,000 B) Gain on Sale of Investments 343,000 Retained Earnings-Prior Period Adj. 450,000 C) Income Tax Expense 137,200 Retained Earnings 205,800 D) AFS Investments 343,000 Income Tax Expense 137,200
Retained Earnings 205,800
D) In April,2016,Norman Industries sold Available-for-Sale securities that cost $450,000 and received a check from its broker for $793,000.When the check was deposited,the accounting clerk debited cash and credited investments for the full amount.The CFO questioned the entry in December,2016.If this is an error,what is the proper correcting entry? (Tax rate is 40%.) A) Gain on Sale of Investments 343,000 B) Gain on Sale of Investments 343,000 Retained Earnings-Prior Period Adj. 450,000 C) Income Tax Expense 137,200 Retained Earnings 205,800 D) AFS Investments 343,000 AFS Investments 343,000

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