Assessing Financial Statement Effects of Passive Investments in Equity Securities

For the following transactions involving investments in marketable securities, assume that:

(1)	Ohlson Co. purchases 5,000 common shares of Freeman Co. at $16 cash per share.
(2)	Ohlson Co. receives a cash dividend of $1.25 per common share from Freeman.
(3)	Year-end market price of Freeman common stock is $17.50 per share.
(4)	Ohlson Co. sells all 5,000 common shares of Freeman for $86,400 cash.

a. Prepare journal entries to record the four transactions.

b. Post the journal entries from a to their respective T-accounts.

c. Record each of the transactions from a in the financial statement effects template.

a.

b.c.

Balance Sheet
Transaction	Cash Asset	+	Noncash Assets	=	Liabilities	+	Contrib. Capital	+	Earned Capital
(1) Purchase 5,000 common shares of Freeman Co. at $16 cash per share		+		=		+		+
(2) Dividend income of $1.25 per share from Freeman Co		+		=		+		+
(3) Increase in investment of Freeman Co.		+		=		+		+
(4) Sale of Freeman Co. for $86,400 cash		+		=		+		+

Income Statement
	Revenues	-	Expenses	=	Net Income
		-		=
		-		=
		-		=
		-		=

a. General Journal Description Debit Credit (1) (2) (3) (4) Cash b. Cash (A) Investment in Freeman Co.(A) Unrealized Gain (R) (1) (1) Loss on Sale of Investment in Freeman Co. (E) (1) (1) (2) (2) (2) (3) (3) (2) (3) (4) (4) (3) (4) (4) Dividend Income (R) (1) (2) (3) (4)