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dit View Favorites Tools Help Tabs O Balser, Annarose- Outloo... Canvas Connect El New tab CH. 18-Homework Problems Help Save &Exit; Submit Check my worlk 6 Ellis Transport Company acquired 1.2 million shares of stock in L&K; Corporation at $66 per share. They are classified by Ellis as "available for sale. Ellis sold 200.000 shares at $68, received a 10% stock div dend, and then later in the year sold another 100,000 shares at $65 10 points Hint There is no entry for the stock dividend, but a new investment per share must be calculated for use later when the shares are sold Skipped Required: Prepare journal entries to record these transactions (If no entry is required for a trensaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as eBook Print View transaction list Journal entry worksheet Record acquisition of shares in L & K Corporation. Next >Explanation / Answer
Solution:
Nos of shares remaining before stock dividend received = 1200000 - 200000 = 1000000
Share received as stock dividend = 1000000*10% = 100000 shares
Cost of acquistion of remaining shares = 1000000*$66 = $66,000,000
Total nos of shares after stock dividend = 1000000 + 100000 = 1100000
Cost per share held = $66,000,000 / 1100000 = $60 per share
Journal Entries - Ellis Transport Company Event Particulars Debit Credit 1 Investment in L&K corporation - Available for Sale Dr $79,200,000.00 To Cash $79,200,000.00 (Being 1.2 million shares of L&K corporation acquired at $66 per share) 2 Cash Dr (200000*$68) $13,600,000.00 To Investment in L&K corporation - Available for Sale $13,200,000.00 To Gain on sale of investment $400,000.00 (To record sale of investment) 3 No entry for stock dividend 4 Cash Dr (100000*$65) $6,500,000.00 To Investment in L&K corporation - Available for Sale $6,000,000.00 To Gain on sale of investment $500,000.00 (To record sale of investment)Related Questions
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