2 Cosmos Comporationem rm investment transactions. (13 pts) trana 2015: Jan. 2 P

Question

2 Cosmos Comporationem rm investment transactions. (13 pts) trana 2015: Jan. 2 Purchased 100,000 shares of Visual, Inc. for $39 per share plus $7,000 in fees and Oct. 15 Dec. 31 commission. These shares represent a 40% ownership of Visual. Received Visual, Inc. cash dividend of S3 per share. Visual reported a net loss of $660,000 for the year. 2016: Jan. 22 Oct. 15 Dec. 31 Sold 80,000 shares of Visual, Inc. for $40 per share less $20,000 in fees. Received Visual, Inc. cash dividend of $2.50 per share. Visual reported a net profit of $750.000 for the year. a. What is the amount of Cosmos long-term investment account at December 31, 2016? 300000-244000 + b. Prepare the journal entries Cosmos Corporation should record for these transactions and events.

Explanation / Answer

a) Ending Balance on 2015 $3,343,000 Less: Investment sold -3180000 Less : Dividend -50000 Add: Profit $300,000 Balance on 2016 $413,000 b) 2015 Date Account Titles and Explanation Debit Credit Jan . 2 Long-Term Investments $3,907,000 Cash [(100,000 x $39) + $7,000] $3,907,000 Oct .1 Cash (100,000 x $3) $300,000 Long Term Investments $300,000 Dec .31 Loss from Long-Term Investments ($660,000 x 40%) $264,000 Long Term Investments $264,000 2016 Jan.22 Cash [(80,000 x $40) - $20,000] $3,180,000 Long Term Investments $3,180,000 Oct.15 Cash (20,000 x $2.50) $50,000 Long Term Investments $50,000 Dec.31 Long-Term Investments $300,000 Profits from Long-Term Investments ($750,000 x 40%) $300,000

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