Derr Co. purchases stock investments (with insignificant influence) at a cost of $250 on December 15.This is its first and only purchase of such securities. On December 28, Derr received a $15 cash dividendfrom the stock investments. At year-end December 31, the stock investments had a fair value of $200.a. Prepare the December 15 purchase entry for stock investments.b. Prepare the December 28 receipt of cash dividends entry.c. Prepare the December 31 year-end adjusting entry for the stock investments' portfolio.d. Explain how each account in entry c is reported in financial statements.e. Prepare the January 3 entry when a portion of its stock investments (that had cost $37) is sold for $40.

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Midwest Bank invests in equity securities. At the beginning of December 2019, the bank held no equity securities. During December of 2019, it entered into the following transactions: Dec. 10 Purchased 400 shares of Carroll Company common stock for $75 per share. 21 Purchased 700 shares of Dynamo Company common stock for $30 per share. At the end of December, the Carroll Company common stock had a quoted market price of $79 per share, and the Dynamo Company common stock had a quoted market price of $33 per share. Question Journal entries to record the preceding information (pay attention to dates) would include: Credit to Cash of $51,000 Credit to Unrealized Holding Gains/Losses - Equity Investments of $3,700 Credit to Equity Investments of $30,000 Credit to Fair Value Adjustment - Equity Investments of $3,700
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