Question

Strategic Investments completed the following investment transactions during 2018: Read the requirements

Requirement 1. Joumalize Strategic's investment transactions. Explanations are not required.
Requirement 2. Classify and prepare a partial balance sheet for Strategic's Phyflexon investment as of December 31. 2018.
Jan. 14: Purchased 800 shares of Phyflexon stock, paying $50 per share. The investment represents 4% ownership in Phyflexon's voting stock. Strategic does not have significant influence over Phyflexon.
Jan. 14. Purchased 800 shares of Phyflexon stock, paying $50 per share.
Aug 22: Received a cash dividend of $0.24 per share on the Phyflexon stock.
Dec. 31. Adjusted the investment to its current market value of $45 per share.
Dec. 31: Phyflexon reported net income of $330,000 for the year ended 2018.

Answer 1

Strategic Investments Company

1. Journal Entries:

Jan. 14:

Debit Investment in Phyflexon $40,000

Credit Cash Account $40,000

Aug 22:

Debit Cash Account $192

Credit Dividends Received $192

Dec. 31:

Debit Loss on Investment $4,000

Credit Investment in Phyflexon $4,000

Dec. 31:

Debit Investment in Phyflexon $13,360

Credit Net Income Share $13,360

2. Partial Balance Sheet

Investment in Phyflexon $49,168

Step-by-step explanation:

a) Data:

No. of shares of Phyflexon Stock = 800

Value of Stock investment = $40,000 ($50 x 800)

Ownership strength = 4%

b) Investment in Phyflexon:

Initial investment = $40,000

Loss on fair value = (4,000)

Net income 13,360

Dividend received (192)

Worth of investments $49,168