Question

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 1

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