Question

Prepare journal entries to record the following transactions involving the short-term securities investments of Duke Co., all of which occurred during year 2013.

a. On March 22, purchased 770 shares of RIP Company stock at $24 per share plus a $190 brokerage fee. These shares are categorized as trading securities
b. On September 1, received a $4 per share cash dividend on the RIP Company stock purchased in transaction a.
c. On October 8, sold 385 shares of RIP Co. stock for $34 per share, less a $180 brokerage fee.

Answer 1

Step-by-step explanation:

The journal entries are shown below:

On March 22

Short term investment A/c Dr $18,670 (770 shares ×$24 + $190)

To Cash A/c $18,670

(Being the short term investment is purchased for cash)

On September 1

Cash A/c Dr $3,080

To Dividend A/c $3,080

(Being cash is received in respect of dividend)

On October 8

Cash A/c Dr $12,910 (385 shares ×$34 - $180)

To Short term investment A/c $9,335 ( $18,670 × 770 shares ÷ 385 shares)

To Gain on investment $3,575

(Being short term investment is sold and the remaining amount is credited to the gain on investment account)