Accounting, Chapters 14-26
27th Edition
ISBN: 9781337514095
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
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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 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. Refer to the Chart of Accounts for exact wording of account titles.
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Entries for investment in stock, receipt of dividends, and sale of shares
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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
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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
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Instructions Chart of Accounts !Journal
5
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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…
Journalize the entries to record the following selected equity investment transactions completed by Perry Company during the current year. Perry accounts for this investment using the cost method.
Feb. 2
Purchased for cash 900 shares of Dexter Co. stock for $54 per share plus a $450 brokerage commission. This represents a less than 10% ownership interest in the company.
Apr. 16
Received dividends of $0.25 per share on Dexter Co. stock.
June 17
Sold 200 shares of Dexter Co. stock for $70 per share less a $500 brokerage commission.
Aug. 19
Purchased 600 shares of Dexter Co. stock for $65 per share plus a $300 brokerage commission.
Nov. 14
Received dividends of $0.30 per share on Dexter Co. stock.
If an amount box does not require an entry, leave it blank.
Feb. 2
fill in the blank 2
fill in the blank 4
Apr. 16
fill in the blank 6
fill in the blank 8
June 17
fill in the blank 10
fill in the blank 11
fill in the blank 13
fill in the…
Chapter 15 Solutions
Accounting, Chapters 14-26
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
Ch. 15 - Prob. 15.1APECh. 15 - Bond investment transactions Journalize the...Ch. 15 - Prob. 15.2APECh. 15 - Stock investment transactions On September 12,...Ch. 15 - Equity method On January 2, Cohan Company acquired...Ch. 15 - Prob. 15.3BPECh. 15 - Valuing trading securities at fair value On...Ch. 15 - Valuing trading securities at fair value On...Ch. 15 - valuing available-for-sale securities at fair...Ch. 15 - Valuing available-for-sale securities at fair...Ch. 15 - Prob. 15.6APECh. 15 - Prob. 15.6BPECh. 15 - Prob. 15.1EXCh. 15 - Prob. 15.2EXCh. 15 - Prob. 15.3EXCh. 15 - Entries for investment in bonds, interest and sale...Ch. 15 - Prob. 15.5EXCh. 15 - Prob. 15.6EXCh. 15 - Prob. 15.7EXCh. 15 - Entries for stock investments, dividends, and sale...Ch. 15 - Entries for stock investments, dividends, and sale...Ch. 15 - Equity method for stock investment At a total cost...Ch. 15 - Prob. 15.11EXCh. 15 - Equity method for stock investment with loss On...Ch. 15 - Equity method for stock investment Hawkeye...Ch. 15 - Missing statement items, trading investments JED...Ch. 15 - Fair value journal entries, trading investments...Ch. 15 - Fair value journal entries, trading investments...Ch. 15 - Fair value journal entries, trading investments...Ch. 15 - Balance sheet presentation, trading investments...Ch. 15 - Missing statement items, available-for-sale...Ch. 15 - Fair value journal entries, availableforsale...Ch. 15 - Fair value journal entries, available for sale...Ch. 15 - Fair value journal entries, availableforsale...Ch. 15 - Balance sheet presentation of available-for-sale...Ch. 15 - Balance sheet presentation of available-for-ale...Ch. 15 - Dividend yield At the market close on May 12 of a...Ch. 15 - Dividend yield The market price for Microsoft...Ch. 15 - Prob. 15.27EXCh. 15 - Prob. 15.28EXCh. 15 - Prob. 15.29EXCh. 15 - Prob. 15.1APRCh. 15 - Stock investment transactions, trading securities...Ch. 15 - Stock investment transactions, equity method and...Ch. 15 - Investment reporting O'Brien Industries Inc. is a...Ch. 15 - Prob. 15.1BPRCh. 15 - Prob. 15.2BPRCh. 15 - Stock investment transactions, equity method and...Ch. 15 - Investment reporting Teasdale Inc. manufactures...Ch. 15 - Selected transactions completed by Equinox...Ch. 15 - Prob. 15.1CPCh. 15 - Prob. 15.2CPCh. 15 - Warren Buffett and "look-through" earnings...Ch. 15 - Benefits of fair value On July 16, 20Y1, Wyatt...Ch. 15 - International fair value accounting International...
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- 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…arrow_forwardJournalize the entries to record the following selected equity investment transactions completed by Perry Company during the current year. Perry accounts for this investment using the cost method. Feb. 2 Purchased for cash 900 shares of Dexter Co. stock for $54 per share plus a $450 brokerage commission. This represents a less than 10% ownership interest in the company. Apr. 16 Received dividends of $0.25 per share on Dexter Co. stock. June 17 Sold 200 shares of Dexter Co. stock for $70 per share less a $500 brokerage commission. Aug. 19 Purchased 600 shares of Dexter Co. stock for $65 per share plus a $300 brokerage commission. Nov. 14 Received dividends of $0.30 per share on Dexter Co. stock.arrow_forwardPrepare journal entries to record the following investment-related transactions of a company for its first year of operations: On May 4, the company purchased 600 shares of Orbital Company Stock at $140 per share as a short-term investment in an available-for-sale security. On July 1, received a $2.50 per share cash dividend on the Orbital Company stock purchased in transaction (a). On September 15, sold 250 shares of Orbital Company stock purchased in transaction (a) for $85 per share On October 15, sold 100 shares of Orbital Company stock purchased in transaction (a) for $185 per sharearrow_forward
- How to journalize the entry for december 31? Apr. 10 Purchased 5,000 shares of Delew Company’s common stock for a price of $49 per share plus a brokerage commission of $90. Delew Company has 230,000 shares of common stock outstanding. July 8 Received a quarterly dividend of $1.00 per share on the Delew Company investment. Sept. 10 Sold 1,100 shares for a price of $44 per share less a brokerage commission of $70. Dec. 31 At the end of the accounting period, the fair value of the remaining 3,900 shares of Delew Company’s stock was $48.52 per share.arrow_forwardEntries for Investment in Stock, Receipt of Dividends, and Sale of Shares The following equity investment transactions were completed by Romero Company during a recent year: Apr. 10. July 8. Purchased 1,800 shares of Dixon Company for a price of $57.75 per share plus a brokerage commission of $450. Received a quarterly dividend of $0.35 per share on the Dixon Company investment. Sept. 10. Sold 1,200 shares for a price of $52 per share less a brokerage commission of $250. Journalize the entries for these transactions. If required, round the final answers to the nearest dollar. For a compound transaction, if an amount box does not require an entry, leave it blank. Apr. 10 - Purchase Investments-Dixon Company Stock Cash ✓ K July 8 Dividend Cash ✓ Dividend Revenue Sept. 10 Sale Cash ✓ Loss on Sale of Investments Investments-Dixon Company Stock ✓arrow_forwardEntries for Investment in Stock, Receipt of Dividends, and Sale of Shares The following equity investment transactions were completed by Romero Company during a recent year: Apr. 10. Purchased 1,700 shares of Dixon Company for a price of $45.75 per share plus a brokerage commission of $425. July 8. Received a quarterly dividend of $0.45 per share on the Dixon Company investment. Sept. 10. Sold 1,100 shares for a price of $41 per share less a brokerage commission of $240. Journalize the entries for these transactions. If required, round the final answers to the nearest dollar. For a compound transaction, if an amount box does not require an entry, leave it blank. Apr. 10 - Purchase fill in the blank 2 fill in the blank 4 July 8 - Dividend fill in the blank 6 fill in the blank 8 Sept. 10 - Sale fill in the blank 10 fill in the blank 11 fill in the blank 13 fill in the blank 14 fill in the blank 16 fill in the blank 17arrow_forward
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- Instructions ait of AC Journal 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. 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.arrow_forward. Journal entries using the Cost and Equity Method of accounting for the for the following transtation : On 1/2/18 the Xylo Corp. purchased 8000 shares of ABC Co. Common Stock At $20 per share. ABC Co. has 40000 shares of Common Stock outstanding. On 10/31/18 Xylo Corp. received a $1.50 per share dividend from ABC Co. On 12/30/18 ABC Company announced earnings of for the year at $200000. Prepare the calculations and Journal Entries, in good form, if the Investment is classified as Available for sale Part A. The Cost Method. Part B The Equity Method of accounting is applicable.arrow_forwardAssume that on February 12, First Union Co. purchases for cash 6,000 shares of Gilbert Co. stock at a price of $22 per share plus a $240 brokerage fee. On April 22, a $0.42- per-shares dividend was received on the Gilbert Co. stock. On May 10, 4,000 shares of the Gilbert Co. stock was sold for $28 per share less a $160 brokerage fee. What accounts would be credited on April 22 for the receipt of the divided on the Gilbert Co. Stock? DATE DESCRIPTION PREF DEBIT CREDIT Apr. 22 (?) $2,520 (?) $2,520 Investments – Gilbert Co. Stock Dividend receivable Cash Dividend revenue O000arrow_forward
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