At December 31, 2014 , Charter Holding Co. owned the following investments in ca

Question

At December 31, 2014, Charter Holding Co. owned the following investments in capital stock of publicly traded companies (classified as available-for-sale securities):

Sold 1,000 shares of its investment in Limited Brands, Inc., at a price of $45 per share, less a brokerage commission of $100.

Sold 2,000 shares of its investment in The Gap, Inc., at a price of $35 per share, less a brokerage commission of $150.

At December 31, 2015, the market values of these stocks were: Limited Brands, Inc., $42 per share; and The Gap, Inc., $37 per share.

instructions:

Prepare journal entries to record the transactions on April 10 and August 7.

At December 31, 2014, Charter Holding Co. owned the following investments in capital stock of publicly traded companies (classified as available-for-sale securities):

Explanation / Answer

Journal Entries April 10 1 Investment in limited brands A/C dr. 1000 To Gain on Investments 1000 (Being Investments to be sold marked to market @ 45) 2 Bank A/c dr. 44900 Brokerage Commission A/C dr. 100 Investment in limited brands A/C dr. 45000 (Being Investments sold @ market price 45$ less brokerage) 3 Gain on Investments 100 Brokerage Commission A/C dr. 100 (Being Brokerage adjusted against gain) 4 Gain on Investments 900 P&L A/C 900 (Being Net gain transferred to P&L (Comprehensive Income) Note: Since these are available for sale securities, these are marked to market at the end of closing financial year and differential is charged to profit and loss account. Therefore value at the beginning of the year = 44*5000 = 220000 given. Value of shares that are sold = 44*1000 = 44000 August 7 1 Loss / Gain on Investments A/C dr. 2000 To Investment in GAP Inc 2000 (Being Investments to be sold marked to market @ 35) 2 Bank A/c dr. 69850 Brokerage Commission A/C dr. 150 To Investment in GAP Inc 70000 (Being Investments sold @ market price 45$ less brokerage) 3 Loss / Gain on Investments A/C dr. 150 Brokerage Commission A/C dr. 150 (Being Brokerage transferred to Loss/gain on investment) 4 P&L A/C dr. 2150 Loss / Gain on Investments A/C 2150 (Being Net loss transferred to P&L (Comprehensive Income) ) Since these are available for sale securities, these are marked to market at the end of closing financial year and differential is charged to profit and loss account. Therefore value at the beginning of the year = 36*4000 = 144000. Valur of shares that are to be sold = 2000* 36 = 72000

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