Asked by Laura Phoenix on Apr 27, 2024
Verified
Hungh Company had the following transactions pertaining to short-term investments in equity securities.
Jan. 1 Purchased 1500 shares of Antuni Company stock for $9500 cash.
June 1 Received cash dividends of $.40 per share on Antuni Company stock.
Sept. 15 Sold 375 shares of Antuni Company stock for $2300 less brokerage fees of $100.
Dec. 1 Received cash dividends of $.80 per share on Antuni Company stock.
Instructions
(a) Journalize the transactions.
(b) Indicate the income statement effects of the transactions.
Equity Securities
Financial instruments representing ownership in a corporation, such as stocks, which provide a claim on part of the company's assets and earnings.
Cash Dividends
Distributions from a corporation to its owners, typically in the form of profit payouts.
Brokerage Fees
Charges levied by a broker for facilitating transactions between two parties, such as buying or selling stocks.
- Develop an understanding of the strategies used in accounting and journalizing the purchase of equity and debt investments.
- Analyze the effects of dividends received and interest accrued on investments for financial reporting.
- Understand the impact of selling parts of investments, including calculating gains or losses.
Verified Answer
Jan. 1Stock Investments 9,500 Cash9,500 June 1 \quadCash(1,500×$.40) 600 Dividend Revenue 600 Sept. 15Cash ($2,300−$100).2,200 Loss on Sale of Stock Investments175 Stock Investments 2,375[(375÷1,500)×$9,500] Dec. 1Cash (1,125×$.80) 900 Dividend Revenue 900\begin{array}{llr} \text {Jan. 1\quad Stock Investments } &9,500\\\quad\quad\quad \text { Cash} &&9,500\\\\ \text { June 1 \quadCash \( (1,500 \times \$ .40) \) } &600\\\quad\quad\quad\quad \text { Dividend Revenue } &&600\\\\ \text { Sept. 15\quad Cash \( (\$ 2,300-\$ 100) \).} &2,200\\ \quad\quad\quad\quad\quad\text { Loss on Sale of Stock Investments} &175\\\quad\quad\quad\quad\quad \text { Stock Investments } &&2,375\\ \quad\quad\quad\quad\quad\text {\([(375 \div 1,500) \times \$ 9,500]\) } \\\\ \text { Dec. 1\quad Cash \( (1,125 \times \$ .80) \) } &900\\\quad\quad\quad\quad \text { Dividend Revenue } &&900\\ \end{array}Jan. 1Stock Investments Cash June 1 \quadCash(1,500×$.40) Dividend Revenue Sept. 15Cash ($2,300−$100). Loss on Sale of Stock Investments Stock Investments [(375÷1,500)×$9,500] Dec. 1Cash (1,125×$.80) Dividend Revenue 9,5006002,2001759009,5006002,375900
(b) Dividend Revenue is reported under Other Revenues and Gains on the income statement. Loss on Sale of Stock Investments is reported under Other Expenses and Losses on the income statement.
Learning Objectives
- Develop an understanding of the strategies used in accounting and journalizing the purchase of equity and debt investments.
- Analyze the effects of dividends received and interest accrued on investments for financial reporting.
- Understand the impact of selling parts of investments, including calculating gains or losses.
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