Question

On July 1, 2018 Tam Company purchased 3,000 shares of Del Company capital stock as a temporary Investment (trading Securities at $66.50 per share plus a commission of $30. On July 15, a 5 per cent stock dividend was received. Tam received a cash dividend of $0.50 per share on August 12, 2018. On November 1, Tam sold all of the shares for $72.20 per share, less a commission of $30. Prepare entries to record all of these transactions in Tam Company's accounts. GENERAL JOURNAL POST REF. Date Account/Description Debit Credit

Answer 1

Solution:

Exercise A GENERAL JOURNAL Date Account/Description July 1, 2018 Investment in Shares Cash [(3,000 * $66.50) +$30] Debit Credit $ 199,530 $ 199,530 July 15, 2018 No Entry for Stock Dividend Receipt $ 1,890 $ 1,890 Aug 12, 2018 Cash Dividend Income (3,000 Original shares + 150 shares received as Stock Dividend) * $0.60 $ 227,400 Nov 1, 2018 Cash Investment in Shares Gain on Sale of Investment $ 197,640 $ 29,760 $ 227,430 Workings: Calculation of Gain on Sale of Investment Sale Price of Invest. (3,150 * $72.20) Less: Commission Charged $300 Cost of Investment Sold $ 197,640 ($ 199,530 - $ 1,890) Gain on Sale of Investment $ 197,670 $ 29,760

Exercise B GENERAL JOURNAL Date Account/Description July 1, 2010 Available-For-Sale Securities Cash Debit Credit $ 7,560 $ 7,560 $ 200 Dec 31, 2010 Loss on AFS Securities Available-For-Sale Securities $ 200 $4100 Dec 31, 2011 Available-For-Sale Securities Loss on AFS Securities Gain on AFS Securities $ 200 $ 210