Question

On March 1, Parnell Industries purchased 2 million Platinum Gems, Inc. common shares for $124 million in cash. Parnell also paid $2 million in brokerage fees and commissions to complete the purchase. These shares represent 10% of the outstanding common stock of Platinum.

Required:
Prepare the appropriate journal entry to record this transaction.

Answer 1

The journal entry to record the purchase of 2 million Platinum Gems, Inc. common shares by Parnell Industries on March 1 can be done by debiting "Investment in Platinum Gems, Inc. shares" for $124 million and "Brokerage fees and commissions expense" for $2 million, and then crediting "Cash" for $126 million.

Step-by-step explanation:

The journal entry to record the purchase of 2 million Platinum Gems, Inc. common shares by Parnell Industries on March 1 would be as follows:

1. Debit: Investment in Platinum Gems, Inc. shares - $124 million
2. Debit: Brokerage fees and commissions expense - $2 million
3. Credit: Cash - $126 million

This transaction represents an investment in Platinum Gems, Inc. common shares by Parnell Industries, and it involves using $124 million in cash to purchase the shares. In addition, $2 million is paid in brokerage fees and commissions. The corresponding journal entry reflects the increase in investment, as well as the expense incurred for the fees and commissions, and the decrease in cash.

Answer 2

Answer and Explanation:

The journal entry is shown below:

Common Stock $124 million

To Cash $124 million

(Being Stock of platinum gems purchased is recorded)

Here common stock is debited as it decreased the equity and the cash is credited as it also decreased the assets

The same should be relevant