On February 12, Addison, Inc. purchased 6,000 shares of Lucas Company at $22 per share plus a $240 brokerage fee. On August 22, Lucas paid a $0.42 dividend per share. On November 10, 4,000 shares of Lucas stock were sold for $28 per share less a $160 brokerage fee. The journal entry for the sale under the fair value method would include a

A) debit to Cash, $111,840
B) credit to Investments, $112,000
C) credit to Loss on Sale, $23,680
D) debit to Cash, $112,000

BThe sale of 4,000 shares at $28 per share results in $112,000 before fees. After deducting the $160 brokerage fee, the cash received is $111,840, which explains choice A. The original purchase of 6,000 shares at $22 per share plus a $240 brokerage fee totals $132,240 for the entire investment. The cost basis for the 4,000 shares sold is $88,160 (4,000 shares * $22 per share = $88,000; plus the proportional brokerage fee of $160, which is 4,000/6,000 of the $240 total fee). The sale at $112,000 (before the sale's brokerage fee) means the investment account should be reduced by this amount, explaining choice B. Choices C and D are incorrect because they do not accurately reflect the transaction's impact on cash and the investment account.