Explanation Stock Investments : It refers to the investment in a financial instrument known as stock that, gives the right of ownership to an investor equal to the amount invested in the company. Thus, it enables a stockholder to claim in the profits and the assets of the company. Journal entry : Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically. Rules of Debit and Credit: Following rules are followed for debiting and crediting different accounts while they occur in business transactions: Debit , all increase in assets, expenses and dividends, all decrease in liabilities, revenues and equities. Credit, all increase in liabilities, revenues, and equities, all decrease in assets, and expenses. Prepare the journal entries to record the given transactions as follows: (a) March 22 – Purchase of short-term investment Date Account Titles and Description Post Ref. Debit ($) Credit ($) March 22 Short-term investment in company R (1) 10,080 Cash 10,080 (To record purchase of short-term investment in cash) Table (1) Short-term investment in Company R is an asset account, and it increases the value of assets by $10,080. Hence, debit short-term investment account with $10,080. Cash is an asset account and it decreases the value of asset by $10,080. Therefore, credit cash account for $10,080. Working note: Calculate the value of short-term investment Short-term investment = [ ( Number of shares × Price per share ) + Brokerage fee ] = ( 1 , 000 × $ 10 per share ) + $ 80 = $ 10 , 000 + $ 80 = $ 10 , 080 (1) (b) September 1 – Cash dividend received from Company R Date Account Titles and Description Post Ref. Debit ($) Credit ($) September 1 Cash 1,000 Dividend revenue (2) 1,000 (To record the cash dividends received from company R) Table (2) Cash is an asset account and it increases the value of asset by $1,000. Therefore, debit Cash account for $1,000. Dividend revenue is a revenue account, and it increases the value of equity by $1,000. Hence, credit dividend revenue with $1,000. Working note: Calculate the value of dividends Dividends = ( Number of shares × Dividend per share ) = ( 1 , 000 × $ 1.00 per share ) = $ 1 , 000 (2) (c) October 8 – Sale 500 shares for $15 per share Date Account Titles and Description Post Ref

Connect Access Card For Financial Accounting Fundamentals

7th Edition

ISBN: 9781260482829

Author: John J Wild

Publisher: McGraw-Hill Education

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Connect Access Card For Financial Accounting Fundamentals

Ch. C - Prob. 1MCQ Ch. C - Prob. 2MCQ Ch. C - Prob. 3MCQ Ch. C - Prob. 4MCQ Ch. C - Prob. 5MCQ Ch. C - Prob. 1DQ Ch. C - Prob. 2DQ Ch. C - Prob. 3DQ Ch. C - Prob. 4DQ Ch. C - Prob. 5DQ

Ch. C - Prob. 6DQ Ch. C - Prob. 7DQ Ch. C - Prob. 8DQ Ch. C - Prob. 9DQ Ch. C - Prob. 10DQ Ch. C - Prob. 11DQ Ch. C - Prob. 12DQ Ch. C - Prob. 13DQ Ch. C - Prob. 14DQ Ch. C - Prob. 1QS Ch. C - Prob. 2QS Ch. C - Prob. 3QS Ch. C - Prob. 4QS Ch. C - Prob. 5QS Ch. C - Prob. 6QS Ch. C - Prob. 7QS Ch. C - Prob. 8QS Ch. C - Prob. 9QS Ch. C - Prob. 10QS Ch. C - Prob. 11QS Ch. C - Prob. 12QS Ch. C - Prob. 13QS Ch. C - QS C-14 Return on total assets The return on total...Ch. C - Prob. 15QS Ch. C - Prob. 16QS Ch. C - Prob. 1E Ch. C - Prob. 2E Ch. C - Prob. 3E Ch. C - Prob. 4E Ch. C - Prob. 5E Ch. C - Prob. 6E Ch. C - Prob. 7E Ch. C - Prob. 8E Ch. C - Prob. 9E Ch. C - Prob. 10E Ch. C - Prob. 11E Ch. C - Prob. 12E Ch. C - Prob. 13E Ch. C - Prob. 14E Ch. C - Prob. 15E Ch. C - Prob. 1AP Ch. C - Prob. 2AP Ch. C - Prob. 3AP Ch. C - Prob. 4AP Ch. C - Prob. 5AP Ch. C - Prob. 1BP Ch. C - Prob. 2BP Ch. C - Prob. 3BP Ch. C - Prob. 4BP Ch. C - Prob. 5BP Ch. C - Prob. 1CSP Ch. C - Prob. 1BTN Ch. C - Prob. 2BTN Ch. C - Prob. 3BTN Ch. C - Prob. 4BTN Ch. C - Prob. 5BTN Ch. C - Prob. 8BTN

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