Question

Prepare the entry to record the sale of 10,000 shares of Kenyon Co. common stock by Hayes Company. The shares were sold for $27.50 per share, and Hayes Company incurred $1,770 in brokerage commissions. The securities originally cost $260,000. What is the entry to record this sale?

Answer 1

To record the sale of 10,000 shares of Kenyon Co. by Hayes Company, debit Cash and Brokerage Commissions Expense, credit Investment in Kenyon Co. Stock, and credit Gain on Sale of Investments for any remaining balance.

Step-by-step explanation:

To record the sale of Kenyon Co. common stock by Hayes Company, the following journal entry should be made:

1. Debit Cash for the total received (10,000 shares × $27.50 per share).
2. Debit Brokerage Commissions Expense for the commissions incurred ($1,770).
3. Credit the Investment in Kenyon Co. Stock for the original cost of the securities ($260,000).
4. If there is a gain or loss, credit or debit Gain on Sale of Investments or Loss on Sale of Investments for the difference between the cash received (net of commissions) and the original cost of the securities.

Assuming the sale results in a gain, the actual entry would look like this:

• Debit Cash $275,000 (10,000 shares × $27.50)
• Debit Brokerage Commissions Expense $1,770
• Credit Investment in Kenyon Co. Stock $260,000
• Credit Gain on Sale of Investments for the remaining balance, which calculates to $275,000 - $1,770 - $260,000 = $13,230