Business, 27.03.2020 00:19, kelfaminu

Flounder Co. had purchased 240 shares of Washington Co. for $42 each this year (Oregon Co. does not have significant influence). Flounder Co. sold 120 shares of Washington Co. stock for $47 each. At year-end, the price per share of the Washington Co. stock had dropped to $37.Prepare the journal entries for these transactions and any year-end adjustments

Answers: 2

Show answers

Answers

answered: emory238

Purchase of shares:

Debit: Equity investment $10,080

Credit: Cash $10,080

Sale of 120 shares:

Debit: Cash $5,640

Credit: Equity investment $5,040

Credit: Gain on sale of 120 shares $600

Journal entry to make fair value adjustment:

Debit: Unrealised loss on holding equity investment $600

Credit: Securities fair value adjustment $600

Explanation:

Purchase of share:

Number of shares purchased: 240 shares

Price per share = $42 per share

Total value of shares purchased = Number of shares purchased × Price per share

Total value of shares purchased = 240 × $42 per share

Total value of shares purchased = $10,080

The journal entry to record the purchase of share would be as follows:

Equity investment is a current asset, this is an investment - A debit itemCash - another current asset, decreased - A credit would be made.Journal entry to record the purchase of shares:

Debit: Equity investment $10,080

Credit: Cash $10,080

Sale of shares:

Number of shares sold = 120 shares

Selling price per share = $47 per share

Value of shares sold = 120 shares × $47 per share

Value of shares sold = $5,640

Cost of equity investment for 120 shares = 120 shares × $42 per share

Cost of equity investment for 120 shares = $5,040

There is a gain on sale of shares = $5,640 - $5,040

Gain on sale of shares = $600

Journal entry to record the sale of the shares

Debit: Cash $5,640

Credit: Equity investment $5,040

Credit: Gain on sale of 120 shares $600

Recording unrealised loss on the equity investment at the year-end:

The price per share has dropped to $37, therefore, we need to adjust the fair value of the investment.

Journal entry to adjust the fair value of equity investment:

Remaining shares: 240 shares - 120 shares(sold) = 120 shares

Cost of equity investment for 120 shares = 120 shares × $42 per share

Cost of equity investment for 120 shares = $5,040

Cost of remaining shares at the year-end = 120 shares × $37 per share

Cost of remaining shares at the year-end = $4,440

There is an unrealised loss on the value of shares = $5,040 - $4,440 = $600.

We need to make a fair value adjustment to the investment:

Journal entry to make fair value adjustment:

Debit: Unrealised loss on holding equity investment $600

Credit: Securities fair value adjustment $600

answered: Guest

You need to give the options.

answered: Guest

answer///supply is elastic, and demand is inelastic;

Other questions on the subject: Business

Business, 22.06.2019 00:50, yolo123321

Cool beans is a locally owned coffee shop that competes with two large coffee chains, planeteuro and frothies. alicia, the owner, hired two students to count the number of customers that entered each of the coffee shops to estimate what percent of people who are interested in coffee are visiting each shop. after a week, the students found the following results: 589 visited cool beans, 839 visited planeteuro, and 1,290 visited frothies. the students were surprised that cool beans had 139 visits on monday which represented 59% of all people who visited one of the three coffee shops on mondays. how many people visited one of the three coffee shops during the week?

Answers: 2

continue

Business, 22.06.2019 11:20, jasalina

In 2000, campbell soup company launched an ad campaign that showed prepubescent boys offering soup to prepubescent girls. the girls declined because they were concerned about their calorie intake. the boys explained that “lots of campbell’s soups are low in calories,” which made them ok for the girls to eat. the ads were pulled after parents expressed concern. why were parents worried? i

Answers: 2

continue

Business, 22.06.2019 20:00, hunter3978

Assume the perpetual inventory method is used. 1) the company purchased $12,500 of merchandise on account under terms 2/10, n/30. 2) the company returned $1,200 of merchandise to the supplier before payment was made. 3) the liability was paid within the discount period. 4) all of the merchandise purchased was sold for $18,800 cash. what effect will the return of merchandise to the supplier have on the accounting equation?

Answers: 2

continue

Business, 22.06.2019 23:10, nataliemakin7123

R& m chatelaine is one of the largest tax-preparation firms in the united states. it wants to acquire the tax experts, a smaller rival. after the merger, chatelaine will be one of the two largest income-tax preparers in the u. s. market. what should chatelaine include in its acquisition plans? it should refocus its attention from the national to the international market. in addition to acquiring the tax experts, it should also determine the best way to drive independent "mom and pop" tax preparers out of business. chatelaine will need to explain to the federal trade commission how the acquisition will not result in an increase in prices for consumers. chatelaine should enter a price-based competition with its other major competitor to force it out of business and become a monopoly.

Answers: 3

continue

Do you know the correct answer?

Flounder Co. had purchased 240 shares of Washington Co. for $42 each this year (Oregon Co. does not...