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.

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

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.