2.) On January 1, 2016, Innocente Company purchased 1,000 shares of Entel common
ID: 2551986 • Letter: 2
Question
2.) On January 1, 2016, Innocente Company purchased 1,000 shares of Entel common stock at $40 per share. Innocente intends to hold this investment for longer than one year. On June 1, 2016, Entel declares and distributes a cash dividend of $0.50 per share. On December 31, 2016, the market price of Entel's stock is $44 per share. On December 31, 2017, the market price of Entel's stock is $46 per share. On February 1, 2018, the Entel's stock is sold for $48 per share. Innocente Company uses a separate allowance account to adjust the investment.
Prepare the journal entries on:
1. January 1, 2016
2. June 1, 2016
3. December 31, 2016
4. December 31, 2017
5. February 1, 2018
Explanations are not required.
Explanation / Answer
Answer
Journal entries :
Date Particulars Dr Cr January 1, 2016 Investment in AFSS $40000 Cash (1,000 × $40 = $40,000) $40000 June 1, 2016 Cash $500 Dividend Revenue(1,000 × $0.5) $500 December 31, 2016 Adjust Investment in AFSS to Market $4000 Unrealized Gain on Investment in AFSS(1,000 × ($44 - $40)) $4000 December 31, 2017 Adjust Investment in AFSS to Market $2000 Unrealized Gain on Investment in AFSS(1,000 × ($46 - $44) $2000 February 1, 2018 Unrealized Gain on Investment in AFSS $6000 Adjust Investment in AFSS to Market ($4,000+ $2,000) $6000 February 1, 2018 Cash(1,000 × $48 = $48,000) $48000 Investment in AFSS $40000 Gain on Sale of Investment in AFSS (48000-40000) $8000Related Questions
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