Brief Exercise 12-5 On August 1, 2018, Hiroole Ltd. purchased 1,000 Datawave Inc

Question

Brief Exercise 12-5 On August 1, 2018, Hiroole Ltd. purchased 1,000 Datawave Inc. common shares for $46,700 cash with the intention of trading the shares and using the fair value through profit or loss model. Datawave declared a dividend of $1 per common share, which Hiroole received on December 28, 2018. On December 31, 2018, Hiroole's year end, the shares' fair value was $51,000. Assume that the shares were sold on February 1, 2019. Record the sale under two different assumptions: (a) the shares sold for $49,000, and (b) the shares sold for $46,200. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) No. Date Account Titles and Explanation Credit (a) Feb. 1 b)Feb. 1

Explanation / Answer

No.

Date

Accounts Title & Explanation

Debit

Credit

(a).

Feb. 1

Cash

$49000

Loss on sale of Trading Securities

$2000

     Investment in Trading Securities

$51000

(For recording sale of trading securities)

(b).

Feb. 1

Cash

$46200

Loss on sale of Trading Securities

$4800

     Investment in Trading Securities

$51000

(For recording sale of trading securities)

Working Note;

(a).

Sale price of securities……………………$49000

Less: Fair value of the securities………..($51000)

Loss on sale of securities ($49000 – $51000) = $2000

(b).

Sale price of securities……………………$46200

Less: Fair value of the securities………..($51000)

Loss on sale of securities ($46200 – $51000) = $4800

No.

Date

Accounts Title & Explanation

Debit

Credit

(a).

Feb. 1

Cash

$49000

Loss on sale of Trading Securities

$2000

     Investment in Trading Securities

$51000

(For recording sale of trading securities)

(b).

Feb. 1

Cash

$46200

Loss on sale of Trading Securities

$4800

     Investment in Trading Securities

$51000

(For recording sale of trading securities)

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