Galaxy company completes the following transactions during the first year. May 9
ID: 2351724 • Letter: G
Question
Galaxy company completes the following transactions during the first year.May 9 Purchase 400 shares of X&O stock as a short-term investment in available for sale securities at a cost of $50 per share plus $400 in broker fees.
June 2 Sells 200 shares of its investment in X&O stock at $56 per share. The broker's commission on this sale is $180
Dec 31 The closing market price (fair value) of the X&O stock is $46 per share.
Prepare the may 9 and June 2 journal entries and the December 31 adjusting entry. This is the first and only time the comopany purchased such securities
Explanation / Answer
May 9 Purchase 400 shares of X&O stock as a short-term investment in available for sale securities at a cost of $50 per share plus $400 in broker fees. Investment (DEBIT) 20400 Cash (CREDIT) 20400 June 2 Sells 200 shares of its investment in X&O stock at $56 per share. The broker's commission on this sale is $180 Cash (DEBIT) 11020 Investment (CREDIT) 10200 Gain on sale of investment (CREDIT) 820 Dec 31 The closing market price (fair value) of the X&O stock is $46 per share. Unrealized loss on investments (DEBIT) 1000 (10200-(46*200)) Valuation allowance (CREDIT) 1000
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