Explanation Prepare journal entry for the purchase of 5,000 shares of Company D at $25 per share and a brokerage of $75. Date Account Titles and Explanations Post. Ref. Debit ($) Credit ($) April 10 Investments–Company D Stock 125,075 Cash 125,075 (To record purchase of shares for cash) Table (1) Explanation: Investments–Company D Stock is an asset account. Since stock investments are purchased, asset value increased, and an increase in asset is debited. Cash is an asset account. Since cash is paid, asset account decreased, and a decrease in asset is credited. Working Notes: Compute amount of cash paid to purchase Company D’s stock. Cash paid = { ( Number of shares purchased× Price per share ) + Brokerage commission } = ( 5,000 shares ×$25 ) + $ 75 = $125,075 Prepare journal entry for the dividend received from Company D for 5,000 shares. Date Account Titles and Explanations Post. Ref. Debit ($) Credit ($) July 8 Cash 3,000 Dividend Revenue 3,000 (To record receipt of dividend revenue) Table (2) Explanation: Cash is an asset account. Since cash is received, asset account increased, and an increase in asset is debited. Dividend Revenue is a revenue account. Since revenues increase equity, equity value is increased, and an increase in equity is credited. Working Notes: Compute amount of dividend received on Company D’s stock. Dividend received = { Number of shares × Dividend per share } = 5,000 shares ×$0 .60 = $3,000 Prepare journal entry for sale of 2,000 shares at $22, with a brokerage of $120. Date Account Titles and Explanations Post

27th Edition

ISBN: 9781337689687

Author: WARREN

Publisher: CENGAGE L

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Question

Chapter 15, Problem 15.7EX

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.

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 Company R

Expert Solution & Answer

Chapter 15 Solutions

CENGAGENOW 6 TERMS ACCESS CARD 27TH ED.

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. 5DQ Ch. 15 - What is the major difference in the accounting for...Ch. 15 - Prob. 7DQ Ch. 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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