Investor copporations buy stock of other corporations to hold as investments als

Question

Investor copporations buy stock of other corporations to hold as investments also. They then have gain or losses to report on resales. They also have the possibility as the stockholder of receiving cash and stock dividends... They also are subjected to a stock split if they are holding the stock at that time. Co. A buys shares in Co.X 100 shares of $5 par for $30 a share and a 10% Brokerage Fee.... Total DEBIT to the asset INVESTMENT account Value of each share (BASIS) GET A 10% "Stock Dividend: No of Shares????? Value Of Each Share Now Held Value Of The Investment Asset Account Holding Those Shares At The Time Of A "2 For 1" Stock Split value of the investment Asst Account Value; Of Each Share Now Held Gain Or Loss if they Sold All Shares For $15 A Share

Explanation / Answer

The cost acquisition of shares debited to Investment account. Cost of shares (100 shares @ $30 each) $                      3,000 Brokerage cost (10% on $3,000) $                          300 Cost of Investment $                      3,300 The Investment account will be debited with the amount of $3,300. The value of each share would be ($3,300/100 shares)= $33 each. When a company receives 10% stock dividend then the number of shares received by the company would be 10% of holding of shares. Stock dividend=(100 shares×10%)=10 shares The value of each share held after stock dividend would be as under: Total number of holding of shares=(100+10)=110 shares Total cost of investment=$3,300 Value of each share=$3,300/110=$30 each Value of investment asset account will remain unchanged with the stock dividend received. Therefore the value of investment asset account will be $3,300. After stock split the value of investment account does not changes. Value of each share after stock split would be as under: No. of shares held after stock split=(110+110)=220 Value of investmnet after stock split=$3,300 Value of share after stock split=$3,300/220=$15 If a company sell all the shares at the rate of $15 each then the company will be in no loss no profit position because the value of share would be equal to selling price of shares which is $15 each. Total debit to Investment account $3,300 Value of each share $33 10% stock dividend : No. of shares 10 Value of each share now held $30 Value of investment asset account $3,300 Stock split of 2 for 1 : Value of investment afte stock split $3,300 Value of each share now held $15 Gain or loss if they sold at $15 each No gain no loss

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.