Question

On December 31, 2018, the end of its first year of operations, Wildhorse Associates owned the following securities that are held as long- term investments.

Common Stock Shares Cost
C Co. 1,050 $50,400
D Co. 5,090 38,175
E Co. 1,199 25,179

On this date, the total fair value of the securities was equal to its cost. The securities are not held for influence or control over the investees. In 2019, the following transactions occurred.

July 1 Received $2 per share semiannual cash dividend on D Co. common stock.
Aug. 1 Received $0.50 per share cash dividend on C Co. common stock.
Sept. 1 Sold 1,020 shares of D Co. common stock for cash at $9 per share.
Oct. 1 Sold 274 shares of C Co. common stock for cash at $54 per share.
Nov. 1 Received $1 per share cash dividend on E Co. common stock.
Dec. 15 Received $0.50 per share cash dividend on C Co. common stock.
31 Received $2.30 per share semiannual cash dividend on D Co. common stock.

At December 31, the fair values per share of the common stocks were C Co. $47, D Co. $7.30, and E Co. $25. These investments should be classified as long-term.

Requried:
Journalize the 2019 transactions

Answer 1

July 1

Dr Cash $10,180

Cr Dividend Revenue $10,180

Aug. 1

Dr Cash $525

Cr Dividend Revenue $525

Sept. 1

Dr Cash $9,180

Cr Gain on Sale of Stock Investments $1,530

Cr Stock Investments $7,650

Oct-01

Dr Cash $14,797

Cr Stock Investments $13,152

Cr Gain on Sale of Stock Investments $1,645

Nov 1

Dr Cash $1,199

Cr Dividend Revenue $1,199

Step-by-step explanation:

Preparation of the journal entries

July 1

Dr Cash (5,090 X $2) $10,180

Cr Dividend Revenue $10,180

Aug. 1

Dr Cash (1,050 X $0.50) $525

Cr Dividend Revenue $525

Sept. 1

Dr Cash [(1,020 X $9) ] $9,180

Cr Gain on Sale of Stock Investments $1,530

($9,180-$7,650)

Cr Stock Investments (274 X $7.5) $7,650

(38,175/5,090=$7.5)

Oct-01

Dr Cash [(274 X $54)] $14,797

Cr Stock Investments (274 X $48) $13,152

($50,400/1,050=$48)

Cr Gain on Sale of Stock Investments $1,645

($14,797-$13,152)

Nov 1

Dr Cash $1,199

Cr Dividend Revenue $1,199

(1,199*$1)