Question

These are practice exam questions with text box answer format, I know they are mixed up just please answer best you can:

1. The Barnes Corporation has purchased 100,000 shares of the Minor Corporation for $1,000,000. These 100,000 shares are 25% of the total common stock of Minor Corporation. What journal entry would use to record this purchase of Minor Corporation common stock?

2. The Tubirg Corporation has 10,000 shares of preferred stock outstanding. The preferred stock has a par value of $100 per share. The dividend rate is 5.5%. What is the annual dividend per share? How much would the total dividend be on all 10,000 outstanding shares?

3. What is an unrealized gain? What causes it?

4. The Minor Company sold 1,000 shares of it's common stock, which has a par value of $5.00 per share for $27,500. What journal entry would you use to record the sale of common stock for cash?

5. The Major Corporation paid $15,000 cash to purchase Equipment.

What journal entry (debit and credit) would you use to record the purchase?

6. The Barnes Corporation has purchased 100,000 shares of the Minor Corporation for $1,000,000. These 100,000 shares are 25% of the total common stock of Minor Corporation. Minor Corporation reports a net income of $750,000 for 2019.What journal entry does Barnes Corporation have to record as a result of this report of net income from Minor Corporation?

Answer 1

1. In the books of Barnes Corporation :

	Debit	Credit
Equity Investments	1,000,000
Cash		1,000,000

2. Annual dividend per share of preferred stock = $ 100 x 5.5 % = $ 5.50

Total dividend on all the 10,000 shares = 10,000 x $ 5.50 = $ 55,000.

3. An unrealized gain results from the increase in the value of an asset, that is yet to be sold for cash. The unrealized gain converts to a realized gain once the investment is sold for cash, and the profit is realized.

4. In the books of Minor Company:

	Debit	Credit
Treasury Stock	27,500
Cash		27,500

5. In the books of Major Corporation:

	Debit	Credit
Equipment	15,000
Cash		15,000

6. In the books of Barnes Corporation :

	Debit	Credit
Equity Investments ( 750,000 x 0.25 )	187,500
Income from Investments		187,500