Question

Assume that on February 12, First Union Co. purchases for cash 6,000 shares of Gilbert Co. stock at a price of $22 per share plus a $240 brokerage fee. On April 22, a $0.42-per-shares dividend was received on the Gilbert Co. stock. On May 10, 4,000 shares of the Gilbert Co. stock was sold for $28 per share less a $160 brokerage fee. What accounts would be credited on May 10 for the sale of the 4,000 shares of Gilbert Co. Stock for $88,160?

DATE	DESCRIPTION	PREF	DEBIT	CREDIT
May 10	(?)		$111,840
	(?)			$88,160
	(?)			23,680

Answer: Investments – Gilbert Co. Stock

Please show me the steps by steps on how to complete the calculations and how this answer is correct.

Answer 1

Number of shares purchased = 6,000

Cost per share = $22

Brokerage fee = $240

Total cost of 6,000 shares purchased = Number of shares purchased x Cost per share + Brokerage fee

= 6,000 x 22 + 240

= 132,000+240

= $132,240

Cost of 4,000 shares = Total cost of 6,000 shares purchased x 4,000/6,000

= 132,240 x 4,000/6,000

= $88,160

Sale price per share = $28

Number of shares sold = 4,000

Brokerage fee paid on sales = $160

Cash received from sale of shares = Sale price per share x Number of shares sold - Brokerage fee paid on sales

= 28 x 4,000 - 160

= 112,000-160

= $111,840

Gain on sale of investment = Cash received from sale of shares- Cost of 4,000 shares

= 111,840-88,160

= $23,680

DATE	DESCRIPTION	PREF	DEBIT	CREDIT
May-10	Cash		$111,840
	Investments - Gilbert Co - stock			$88,160
	Gain on sale of investment			23,680
	( To record sale of investment at a gain)