During 2014, Woods Company purchased 60,000 shares of Holmes Corporation common
ID: 2453580 • Letter: D
Question
During 2014, Woods Company purchased 60,000 shares of Holmes Corporation common stock for $945,000 as an available-for-sale investment. The fair value of these shares was $900,000 at December 31, 2014. Woods sold all of the Holmes stock for $17 per share on December 3, 2015, incurring $42,000 in brokerage commissions.
Prepare the necessary journal entries, in T-account format, to recognize these economic transactions.
(I know the Gain on sale is $33,000. I just need helping with journal entries)
Thank you!
Explanation / Answer
Solution:
(A). Purchase:
Purchase (60,000 * 15) 9,00,000
Cash (60,000 * 15) 9,00,000
(B). Common Stock:
Cash $ 9,45,000
Common Stock $ 9,45,000
(C). Sale of Stock:
Cash 10,20,000
Common Stock 9,45,000
Additional Paid-in Capital 75,000
(D). Brockerage Commission:
Cash 42,000
Commission 42,000
(E). Gain on Sale:
Cash 33,000
Gain on Sale of Shares 33,000
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