Accounting
27th Edition
ISBN: 9781337514071
Author: WARREN
Publisher: Cengage
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Question
Chapter 15, Problem 15.6EX
(a)
To determine
Stock investments: Stock investments are equity securities which claim ownership in the investee company and pay a dividend revenue to the investor company.
Cost method: Cost method is the accounting method used for accounting stock or equity investments which claim less than 20% of the outstanding stock of the investee company.
Debit and credit rules:
- Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in
stockholders’ equity accounts. - Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.
To journalize: The stock investment transactions in the books of Corporation S, under the cost method
(b)
To determine
To Prepare: journal entry for the dividend received from Corporation E for 12,000 shares.
(c)
To determine
To Prepare: Journal entry for sale of 4,000 shares of Corporation E at $62, with a brokerage of $100.
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On February 22, Stewart Corporation acquired 6,000 shares of the 210,000 outstanding shares of Edwards Co, common stock at $29.80 plus commission charges of $1,200. On June 1, a cash dividend of $1.10 per share was received. On November 12, 2,000 shares were sold at $36 less commission charges of $240.
Entries for Investment in Stock, Receipt of Dividends, and Sale of Shares
On February 22, Stewart Corporation acquired 8,700 shares of the 305,000 outstanding shares of Edwards Co. common stock at $23.90 plus commission charges of $870. On June 1, a cash dividend of $1.10 per share was received. On November 12, 2,900 shares were sold at $29 less commission charges of $348.
In your computations, round per share amounts to two decimal places. When required, round final answers to the nearest dollar.
a. Using the cost method, journalize the entry for the purchase of stock.
Feb. 22
fill in the blank 18df41fb2fe9030_2
fill in the blank 18df41fb2fe9030_4
b. Using the cost method, journalize the entry for the receipt of dividends.
June 1
fill in the blank 30462dfb4fb1043_2
fill in the blank 30462dfb4fb1043_4
c. Using the cost method, journalize the entry for the sale of 2,900 shares.
For a compound transaction, if an amount box…
Show Me How
Entries for investment in stock, receipt of dividends, and sale of shares
eBook
Instructions
On February 22, Stewart Corporation acquired 7,200 shares of the 200,000 outstanding shares of Edwards Co. common stock at $42 plus commission charges of $170. On
June 1, a cash dividend of $1.85 per share was received. On November 12, 3,100 shares were sold at $49 less commission charges of $165.
Journal
1
Using the cost method, journalize the entries for (a) the purchase of stock, (b) the receipt of dividends, and (c) the sale of 3,100 shares. Refer to the Chart of Accounts for exact
wording of account titles. When required, round your answers to the nearest dollar.
2
3
4
Instructions Chart of Accounts !Journal
5
6
7
DATE
Feb. 22
Jun. 1
✓
Income of Edwards Co.
Interest Revenue
Print Item
Cash
Cash
Dividend Revenue
Nov. 12 Cash
DESCRIPTION
JOURNAL
Unrealized Gain (Loss) on Available-for-Sale Investments
heck My Work 1 more Check My Work uses remaining.
✓
POST. REF.
DEBIT
302,400.00…
Chapter 15 Solutions
Accounting
Ch. 15 - Why might a business invest cash in temporary...Ch. 15 - What causes a gain or loss on the sale of a bond...Ch. 15 - When is the equity method the appropriate...Ch. 15 - How does the accounting for a dividend received...Ch. 15 - Prob. 5DQCh. 15 - What is the major difference in the accounting for...Ch. 15 - Prob. 7DQCh. 15 - How would a debit balance in Unrealized Gain...Ch. 15 - What are the factors contributing to the trend...Ch. 15 - Prob. 10DQ
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