Princeton Company acquired some of the 70,000 outstanding shares of the common s

Question

Princeton Company acquired some of the 70,000 outstanding shares of the common stock of Cox Corporation as trading securities. The accounting period for both companies ends December 31. July 2 Purchased 8,400 shares of Cox common stock at $24 per share. Dec. 15 Cox Corporation declared and paid a cash dividend of $3 per share. Dec. 31 Determined the fair value of Cox stock to be $25 per share. Indicate the effects (direction and amount) of the transactions listed above. (Enter any decreases to account balances with a minus sign.)

Explanation / Answer

Note:

Journal entry for the above transactions

July 02

Trading Securities (Debit) 8,400 X $24 = $201,600

Cash (Credit) $201,600

Dec 15

Cash  (Debit) 8,400 X $3 = $25,200

Dividend Income (Credit) $25,200

Dec 31

Market adjustment -Trading Securities  (Debit) 8,400 X $1 = $8,400

Unrealized gain on trading securties (Credit) $8,400

Balance Sheet Income Statement Date Assets Liabilities Stockholders
Equity Revenues Expenses Net Income 2-Jul 201'600 -201'600 15-Dec 25'200 25'200 25'200 25'200 31-Dec 8'400 8'400 8'400 8'400

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