Question
During the fourth quarter of 2020, Dorsey Enterprises Corp. decided to invest excess cash in the equity securities of blue chip companies. Dorsey Enterprises Corp.
During the fourth quarter of 2020, Dorsey Enterprises Corp. decided to invest excess cash in the equity securities of blue chip companies. Dorsey Enterprises Corp. engaged in the following transactions relating to its investments and obtained information about its investment holdings as detailed below.
Prepare the entries in general journal form to record the investment transactions of Dorsey Enterprises Corp. and properly report the investments in the GAAP financial statements for 2020 as well as additional transactions in 2021. Present any supporting calculations in the spaces provided.
Be sure to provide an explanation of the effect of any transaction that did not require a formal journal entry. (4 points each except when otherwise noted)
- On October 15, 2020, the company purchased 5,000 common shares of The Coca-Cola Company at $58.25 per share and incurred a brokers fee of $350 on the purchase.
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- On October 22, 2020, the company purchased 10,000 common shares of Microsoft Corporation at $28.20 per share and incurred a brokers fee of $500 on the purchase.
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- On October 29, 2020, the company sold the 10,000 common shares of Microsoft Corporation when its price dropped to $26.75 per share and incurred $500 brokers commission on the sale.
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- On November 12, 2020, the board of directors of The Coca-Cola Company announced and distributed a 2-1 common stock split. Coca-Colas stock was selling at $62 and $31 per share immediately before and after the split.
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- On December 1, 2020, the board of directors of The Coca-Cola Company declared a $0.28 per share cash dividend payable to its common shareholders on January 9, 2021.
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- On December 31, 2020, the company determined that the closing prices of its holdings of common stock were: The Coca-Cola Company $34.50 per share.
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