12. Hulse Company had the following transactions pertaining to stock investments.
|
Feb. |
1 |
Purchased 600 shares of Wade common stock (2%) for $7,200 cash. |
|
July |
1 |
Received cash dividends of $1 per share on Wade common stock. |
|
Sept. |
1 |
Sold 300 shares of Wade common stock for $4,300. |
|
Dec. |
1 |
Received cash dividends of $1 per share on Wade common stock. |
Instructions
(a) Journalize the transactions.
(b) Explain how dividend revenue and the gain (loss) on sale should be reported in the income statement.
Answer
A.
Journalize the transactions:
| Date | Particulars | Dr | Cr |
| Feb. 1 | Stock Investment | $7200 | |
| Cash | $7200 | ||
| July 1 | Cash(600*1) | $600 | |
| Dividend Income | $600 | ||
| Sept. 1 | Cash | $4300 | |
| Stock Investment(12*300) | $3600 | ||
| Realized gain on sale on Stock Investment(4300-3600) | $700 | ||
| Dec. 1 | Cash(300*1) | $300 | |
| Dividend Income | $300 |
B.
The Income Statement:
| Dividend Revenue(600+300) | $900 |
| Realized Gain on Sale of Stock Investment | $700 |
| Total revenue | $1600 |
Balance Sheet:
Current Assets:
Stock Investment $3600
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