Question
Asked Dec 20, 2019
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On February 22, Stewart Corporation acquired 12,000 shares of the 400,000 outstanding shares of Edwards Co. common stock at $50 plus commission charges of $120. On June 1,a cash dividend of $1.40 per share was received. On November 12, 4,000 shares were sold at $62 less commission charges of $100. Using the cost method, journalize the entries for (a) the purchase of stock, (b) the receipt of dividends, and (c) the sale of 4,000 shares.

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Expert Answer

Step 1

a.

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Account Titles and Debit Credit Post. Date Explanations |(s) Ref. |($) Investments-Corporation E Stock February 22 600,120 Cash 600,120 (To record purchase of shares for cash) Working Notes: Compute amount of cash paid to purchase Corporation E's stock. (Number of shares purchasedx Cash paid = Price per share Brokerage commission = (12,000 shares x$50) + $120 = $600,120

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Step 2

b.

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Account Titles and Post. Debit Credit Date Explanations (s) |(s) Ref. June 1 Cash |16,800 |16,800 Dividend Revenue | (To record receipt of dividend revenue) Working Notes: Compute amount of dividend received on Corporation E's stock. Dividend received= [ Number of shares x | Dividend per share } = 12,000 shares x$1.40 = $16,800

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Step 3

c.

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Account Titles and Debit Credit Post. Ref. Date |(s) Explanations November 12 Cash |(s) | 247,900 Gain on Sale of 47,860 Investments Investments- 200,040 Corporation E Stock | (To record sale of shares) Working Notes: Calculate the realized gain (loss) on sale of stock. Step 1: Compute cash received from sale proceeds. ( Number of shares soldx ( Sale price per share Brokerage commission (4,000 shares x$62) – $100 Cash received = = $247,900

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