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On 12/31/16 Levinson Corp. held no investment securities. On 1/01/17 Levinson purchased 12,000 shares of Whitmore...

On 12/31/16 Levinson Corp. held no investment securities. On 1/01/17 Levinson purchased 12,000 shares of Whitmore Corp. stock for $50/share and continued to hold the stock until 9/12/18 when it was sold for $56/share (ignore transaction costs). On 8/20/17, and on 8/19/18 Levinson receives a dividend of $2/share on the Whitmore stock. The market value of Whitmore stock was $48/share on 12/31/17 and $51/share on 12/31/18.

Required: Provide all investment related journal entries assuming that Levinson classifies the Whitmore Corp. stock investment as “Trading.”

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Answer #1

Journal entry :

Date account and explanation debit credit
01/01/2017 Investment in whitmore corp (12000*50) 600000
Cash 600000
(To record investment)
8/20/17 Cash (12000*2) 24000
Dividend revenue 24000
(To record dividend)
12/31/17 Unrealized holding loss-Income 24000
Investment in whitmore corp 24000
(To record fair value adjustment)
8/19/18 Cash 24000
Dividend revenue 24000
(To record dividend)
9/12/18 Cash (12000*56) 672000
gain on sale of investment 96000
  Investment in whitmore corp 576000
(To record sale of investment)
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