Investment – non-strategic investment Prepare general journal entries to record

Question

Investment – non-strategic investment

Prepare general journal entries to record the following transactions for The Chocolate Factory in its first year of operations:

(a) On May 4, as a short term investment, purchased 500 shares of Power Corp., paying $55,500.
(b) On July 1, received $2.00 per share cash dividend on the Power Corp. shares.
(c) On September 15, sold 300 Power Corp. shares for $120 per share.

(d) The December 31 fair value of the company's short term investment in Power Corp revealed a $2,000 unrealized gain.

Explanation / Answer

Investment in Power Corp DR. 55.500

Bank CR. 55,500

Bank DR.1000

Dividend CR, 1000

Bank DR. 36000

Investment in Power Corp CR 33,300(55500/500*300)

Profit on sale of Investment CR.2700

Investmet in power corpDR. 2000

Fair value CR. 2000

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