On April 5, 2004, Meyers company buys 5,000 shares of investee company for $12 p

Question

On April 5, 2004, Meyers company buys 5,000 shares of investee company for $12 per share and pays commissions of $1,800. this represents 8% of the shares of investee and the investment is classified as available-for-sale. during 2004, myers receives $1 per share in dividends and investee earns $35,000. On december 31, 2004, the investee stock has a fair value of $15 per share. On February 3, 2005, the investment is sold for $16 per share less commissions of $2,000. What journal entry will Myers make on April 5, for the purchase

Explanation / Answer

Solution.

Prepretion of journal entry.

Date Account Title Debit Credit 5-Apr-04 Short term investment                60,000 Comissions paid                  1,800 Cash             61,800 (To record investment) Cash                  5,000 Dividend revenue               5,000 (To record cash received in mode of dividend $1 per share)

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