Question

On June 1, Pane purchases 6,000 shares of Crane stock and 4,000 shares of Lane stock. At the time of purchase, the Crane and Lane stocks have a readily determinable fair value of $30 and $65, respectively.

On June 5, Pane sells an investment classified as available-for-sale for $200,000. The debt securities were purchased at par value during the prior year for $150,000. At the end of the prior year, the securities were valued at$170,000

. On June 7, Pane declares cash dividends for preferred ($20,000) and common ($25,000) stock payable to stockholders of record on June 19. Instead of immediately reducing retained earnings, Pane uses the ‘‘Dividends Declared’’ account

On July 1, Pane issues $1,000,000 of 10 percent bonds dated July 1 for $968,327. The bonds are due in 4 years, pay interest semi-annually (on January 1 and July 1), and are issued to yield 11 percent. Record the issuance of the bonds

Make journal entries.

Answer 1

Journal entries.

1.

Investment in common share acc. Dr. 180000(30×6000)

Investment in common share acc. Dr 260000 (4000×65)

To cash acc. 440000

(Being share purchased )!

2. Cash acc dr. 200000

To profit on ssle 30000

To investment acc. 170000

Bing investment sold

3.

Reatin earning dr. 45000

To preferred dividend declared acc 20000

To common dividend declared acc 25000

Being dividend declared.

4.

Cash acc. Dr. 968327

Discount acc. Dr. 31673

To bond payable 1000000

Being bond issued.