Princeton Company acquired some of the 60,000 outstanding shares of the common s

Question

Princeton Company acquired some of the 60,000 outstanding shares of the common stock of Cox Corporation as trading securities. The accounting period for both companies ends December 31. Assume that Princeton Company purchased the voting stock of Cox Corporation for its portfolio of available-for-sale securities instead of its trading securities portfolio. July 2 Purchased 9,000 shares of Cox common stock at $30 per share. Dec. 15 Cox Corporation declared and paid a cash dividend of $2 per share. Dec. 31 Determined the fair value of Cox stock to be $31 per share. Required: Prepare the journal entries for each of the above transactions listed.

Explanation / Answer

Date Particulars Debit Credit July, 2 Available for sale Investments $ 270,000 Cash $ 270,000 Dec, 15 Cash $    18,000 Dividend $    18,000 Dec, 31 Available for sale Investments $      9,000 Change in Fair Value of AFS(Comprehensive Income) $      9,000

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