On February 15, Jewel Company buys 10,000 shares of Marcelo Corp. common stock a

Question

On February 15, Jewel Company buys 10,000 shares of Marcelo Corp. common stock at $30.03 per share plus a brokerage fee of $550. The stock is classified as available-for-sale securities. On March 15, Marcelo Corp. declares a dividend of $1.90 per share payable to stockholders of record on April 15. Jewel Company received the dividend on April 15 and ultimately sells half of the Marcelo Corp. stock on November 17 of the current year for $30.80 per share less a brokerage fee of $400. The journal entry to record the sale of the 5,000 shares of stock on November 17 is:

Explanation / Answer

Note : Investment cost per share = (Total Purchase cost + Brokerage fee) / No . of shares purchased.

[(10,000 shares * $30.03 ) + $550] / 10,000 shares = $300,850 / 10,000 shares = $30.085

Journal Entry

Date Accounts Titles & Explanation Debit ($) Credit ($) November 17 Cash [(5,000 shares * $30.80) - $400] 153,600 Available for sale securities [5,000 shares * $30.085] 150,425 Realized gain on sale of available for sale securities 3,175 ( To record sales of 5,000 shares of Marcelo Corp. at a gain)

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