Final answer:
The sale of an equity security with significant influence at a price of $35,000 that costs $30,000 results in a capital gain of $5,000. The journal entry would credit Equity Method Investments for $30,000 and Gain on Sale of Stock Investments for $5,000.
option d is the correct
Step-by-step explanation:
When an equity security with significant influence is sold for $35,000 cash, and the cost of the security was $30,000, we recognize a capital gain on the sale of the investment.
The correct journal entry to record this sale includes debiting Cash for $35,000, which represents the cash received from the sale. We also credit the Equity Method Investments account for the cost of the investment, which is $30,000, and record the $5,000 difference as a Gain on Sale of Stock Investments.
Therefore, the credit entries would consist of Equity Method Investments for $30,000 and Gain on Sale of Stock Investments for $5,000. This gain represents the capital gain, defined as the increase in value of the stock between the purchase price and the selling price.