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30 November, 06:42

Jackson Company engaged in the following investment transactions during the current year.

Feb 17 Purchased 500 shares of Medical Company common shares for $20 per share plus a brokerage fee of $100. These are trading securities.

April 1. Bought 30,000 of the 100,000 outstanding shares of Olde Company for $300,000. Goodwill of 80,000 was included in the price.

June 25. Received a $1.20 per share dividend on Medical Company stock.

June 30. Olde Company reported second quarter profits of $20,000.

Oct 1. Purchase 2,000 shares of Alpha Company for $15 per share plus a brokerage fee of $400. These shares are classified as available for sale

Dec 31. Medical Co. shares are selling for $25 and Alpha stock is selling for $12.

Required:

Prepare the appropriate journal entries to record the transactions for the year including year-end adjustments. Show work and calculations.

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Answers (1)
  1. 30 November, 06:50
    0
    Feb. 17

    Dr Investment in Medical 10,100

    Cr Cash 10,100

    Apr. 1

    Dr Investment in Olde 300,000

    Cr Cash300,000

    Jun. 25

    Dr Cash 600

    Cr Investment revenue 600

    Jun. 30

    Dr Investment in Olde 6,000

    Cr Investment revenue 6,000

    Oct. 1

    Dr Investment in Alpha 30,400

    Cr Cash 30,400

    Dec. 31

    Dr Investment in Medical 2,400

    Cr Unrealized holding gain on investments 2,400

    Dec. 31

    Dr Unrealized holding loss on investments6,400

    Cr Investment in Alpha 6,400

    Explanation:

    Jackson Company Journal entries

    Feb. 17

    Dr Investment in Medical 10,100

    [$500 x $20) + $100]

    Cr Cash 10,100

    Apr. 1

    Dr Investment in Olde 300,000

    Cr Cash300,000

    Jun. 25

    Dr Cash 600

    (500 x $1.20)

    Cr Investment revenue 600

    Jun. 30

    Dr Investment in Olde 6,000

    ($20,000 x 30%)

    Cr Investment revenue 6,000

    Oct. 1

    Dr Investment in Alpha 30,400

    [ (2,000 x $15) + $400]

    Cr Cash30,400

    Dec. 31

    Dr Investment in Medical 2,400

    [500 x $25) - $10,100]

    Cr Unrealized holding gain on investments 2,400

    Dec. 31

    Dr Unrealized holding loss on investments 6,400

    Cr Investment in Alpha 6,400

    [ (2,000 x $12) - $30,400]
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