Question

On January 23, 17,000 shares of Tolle Company are acquired at a price of $24 per share plus a $180 brokerage commission. On April 12, a $0.30-per-share dividend was received on the Tolle Company stock. On June 10, 6,600 shares of the Tolle Company stock were sold for $31 per share less a $125 brokerage commission. Prepare the journal entries for the original purchase, the dividend, and the sale under the cost method. Refer to the Chart of Accounts for exact wording of account titles. When required, round your answers to the nearest dollar.

Answer 1

Step-by-step explanation:

The journal entries are shown below:

On January 23

Investments -Tolle Company Stock A/c Dr $408,180

To Cash A/c $408,180

(Being the investment are acquired for cash)

The computation is shown below:

= (17,000 shares × $24) + $180

= $408,180

On April 12

Cash A/c Dr $51,00 (17,000 shares × $0.30)

To Dividend revenue A/c $51,00

(Being the dividend was received)

On June 10

Cash A/c Dr

To Investments-Tolle Company StockA/c $158,470

To Gain on Sale of Investments A/c $46,005

(Being the cash is received)

The computation is shown below:

For cash account

= (6,600 shares × $31 per share) - $125

= $204,475

For Investments-Tolle Company Stock

= $408,180 ÷ 17,000 shares × 6,600 shares

= $158,470

And, the remaining balance is credited to the gain on sale of investment account