Read the story below and answer the questions indicated:

At the beginning of the question-and-answer portion of the annual stockholders' meeting of Matrix Corporation, stockholder Niamh Farrell asks, Why did Matrix management sell the holdings in ABC Company at a loss when this company has been very profitable during the period Matrix held its stock?

Since president Samuel Herring has just concluded his speech on the recent success and bright future of Matrix, he is taken aback by this question and responds, I remember we paid $1,500,000 for that stock one year ago. I am sure we sold that stock at a much higher price. You must be mistaken.

Stockholder Farrell retorts, Well, right here in footnote number 7 to the annual report it shows that 250,000 shares, a 40% interest in ABC, were sold on the last day of the year. Also, it states that ABC earned $500,000 this year and paid out $125,000 in cash dividends. Finally, the income statement for this year shows a loss on the sale of ABC stock of $25,000. So, I doubt that I am mistaken.

Red-faced, president Herring turns to you.

Questions:

1) What dollar amount did Matrix receive upon the sale of the ABC stock? Show computations, Journal Entries, etc. Your answer must be supported by details/examples/computations.

2) Explain why both stockholder Farrell and president Herring are correct. Your answer must be supported by details/examples/computations.