Interest and prepare the journal entry to record the sale

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Gain of loss on sale of the 20% interest, balance in purple's investment.

The balance of Purple Company's Investment in Silver, Inc. account at December 31, 2009, was $448,000.  Annual excess fair-value amortization of $12,000 results from the acquisition.  On May 1, 2010, Purple sold a 20% interest in Silver (One-fourth of its holdings) for $130,000.  During 2010, Silver had net income of $150,000 (earned evenly during the year), and on July 1, 2010, Silver declared dividends of $80,000.

a) Determine the gain of loss on sale of the 20% interest and prepare the journal entry to record the sale.

b) Determine the balance in purple's investment in Silver account as December 31, 2010.

Reference no: EM1310807

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