Question

Ellis Transport Company acquired 1.1 million shares of stock in L&K Corporation at $55 per share. They are classified by Ellis as “available for sale.” Ellis sold 100,000 shares at $59, received a 10% stock dividend, and then later in the year sold another 100,000 shares at $54. Hint: There is no entry for the stock dividend, but a new investment per share must be calculated for use later when the shares are sold.

Required: Prepare journal entries to record these transactions: 1) Record acquisition of shares in L & K Corporation. 2) Record sale of 100,000 shares. 3) Record sale of 100,000 shares.

MAKE IT IN A JOURNAL FORMAT PLEASE.

Answer 1

Note: The amounts are in millions.

Ellis Transport company Journal Entries (In millions General Journal Debit credit Record acquisition of shares :- Equity Inveslment in LeK corp.alc -----DV $ 60.5 cash alc $ 60.5 (1.1 million shares & $55 per share) (To Record investment in equity) Record sale of 100000 shares or TO $5.9 Cash alc Dr Coll million shares & $59 pershare) TO Equity Investment in Lefk corp.91 Cool million shares & $ 55 per share) To Gain on sale of investment alc. (518) $ 5.5 $ 0.4 (To Record investment sold and gain on cale of investment recognised) TO Record sale of 100,000 shares : working Note : - • shares heed before stock dividend - 1 million (1.1 million shares - 0.1 million shares) to shares held after stock dividend = 1.1 million (1 million + (million x 60°)) Met investment cost per share share 1 million x 55 c Investment held after first sale. 1.1 million 2, Total outstanding after stock clividend [. The stock dividend recieved reduces cost of investment) Entry cash ak – – Cool million shares x su) $5.4 To Equity Investment in lift corp.ale (ol million shares x 50 per Share) WNO) To Gain on sale of investment ale = 50 per the 5 $0.4 (lt) To record investment sold

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