On January 2, 2012, Drexello, Inc., purchased $75,000 of 10%, five-year bonds of Fast Trucking as a

Question:

On January 2, 2012, Drexello, Inc., purchased $75,000 of 10%, five-year bonds of Fast Trucking as a held-to-maturity security at a price of $77,610 plus accrued interest. The bonds mature on November 1, 2016, and interest is payable semiannually on May 1 and November 1. Drexello uses the straight-line method of amortizing bond premiums and discounts.

In addition to the bonds, Drexello purchased 30% of the 50,000 shares of outstanding common stock of Mellon Company at $42 per share, plus brokerage fees of $450, on January 10, 2012. On December 31, 2012, Mellon announced that its net income for the year was $150,000 and paid an annual dividend of $2 per share as advised by the board of directors of Drexello. The closing market price of Mellon common stock on December 31 was $38 per share.

Required:

1. Record all the 2012 transactions relating to these two investments in general journal form.

2. Show how the long-term investments and the related revenues would be reported on the financial statements of Drexello at December 31, 2012.

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial... Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...