Mr. T’s Fashions, once a direct competitor to Italian Stallion’s clothing line,
ID: 2469865 • Letter: M
Question
Mr. T’s Fashions, once a direct competitor to Italian Stallion’s clothing line, has formed a friendship in recent years leading to a small investment (less than 5%) by Mr. T in the common stock of Italian Stallion. Mr. T’s engages in the following transactions relating to its investment. Assume that the securities are available-for-sale securities.
February 1 Purchases 200 shares of Italian Stallion common stock for $15.80 per share.
June 15 Sells 60 shares of Italian Stallion stock for $13.60 per share.
October 31 Receives a cash dividend of $0.60 per share.
December 31 The fair value of Italian Stallion’s stock is $11.60 per share.
1. Record each of these transactions, including an adjustment on December 31 for the investment’s fair value, if appropriate. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Investments, December 31: ______________
2. Calculate the balance of the Investments account on December 31.Investments, December 31: ______________
Explanation / Answer
Journal Entries
Feb 1
Available for sale securities
$3,160
To Cash
$3,160
June 15
Cash
816
Loss on sale of investment
132
To available for sale of securities
948
Oct 31
Cash
84
To Dividend income
84
Dec 31
Unrealized gain or loss -OCI
588
To Available for sale securities
588
2) investment dec 31 $1,624
Feb 1
Available for sale securities
$3,160
To Cash
$3,160
June 15
Cash
816
Loss on sale of investment
132
To available for sale of securities
948
Oct 31
Cash
84
To Dividend income
84
Dec 31
Unrealized gain or loss -OCI
588
To Available for sale securities
588
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