Journal Entries( Common shares)
The following are investment activities for Coco Company. 1) On January 31, 2020, Coco Company purchased a $14,400, 8-year bond at par with 5% interest paid annually on December 31. Coco Company is planning to hold this investment until maturity. 2) On February 10, 2020, Coco Company invested $21,700 in Bast Company by purchasing 3,100 common shares. This is an insignificant investment in Bast Company with the intention of selling it within a year. 3) On March 1, 2020, Coco Company made an investment of $156,800 in Elgin Company by acquiring 7% of its 160,000 outstanding common shares. Coco Company plans to hold on to these shares for at least a few years. 4) On April 1, 2020, Coco Company received a cash dividend from Bast Company for a total of $1,010. 5) On April 30, 2020, Coco Company received a cash dividend from Elgin Company for a total of $1,810. 6) On Coco Company's year-end of October 31, 2020, Bast Company's common shares were trading at $8.00 per share, and Elgin Company's shares were trading at $13.00 per share. Required Prepare journal entries using proper accounting methods for all transactions including the year end accrual of the bonds' interest Date Account Title and Explanation Debit Credit Oct 31 Answed Valuation Allowance for Fair Value Adjustment Answer Answer Unrealized Cain en Fair Value Adjustment Answer To record unrealized gain on investment in Bast Company Oct 31 Answerl Werealized Loss on Fair Value Adjustment Answer Answerl Valuation Allowance for Far Value Adjustment Answer To record unrealized loss on investment in Elgin Company Oct 31 Answerl Interest Receivable Answer Answed Interest Revenue Answer To record accrued interest revenue on bond investmentRaman Company paid $197,000 to purchase a portfolio of debt investments on March 1, 2020, Man- agement's intention is to hold them for less than one year. Management does not intend to hold any debt investments until their maturity in this portfolio. On April 20, 2020, Raman Company sold half of the investments in this portfolio for $104,500. Prepare the journal entry to record the sale. Date Account Title and Explanation Debit Credit Answer Cash Apr 20 Answer Answer Gain on Sale of investment Answer Answerl Short-Term Investment - Bonds Answer To record sale of half of investmentsOn May 1, 2020, Wang Company, a public company, acquired 157,080 of the 561,000 outstanding common shares from Preston Company for a total of $1,599,000. This investment is part of Wang Company's long-term business diversification plan. Wang Company's year-end is December 31, and it chooses to use the equity method of accounting for its strategic investments. During 2020, the follow- ing investment activities occurred. 1) Preston Company recorded an annual net income of $1,052,000 for its 2019-2020 fiscal year-end of June 30, 2020. 2) Preston Company paid a cash dividend of $208,000 on July 30, 2020. Required Prepare journal entries to record the acquisition of shares by Wang Company, the revenue of invest- ment from Preston Company on June 30, 2020 and the receipt of cash dividends on July 30, 2020. For simplicity, calculate any share of profit strictly as a percentage of the current holdings, although those shares have not been held for a full year. Date Account Title and Explanation Debit Credit Answerl Investment in Company Shares Jun 30 Answerd Answer Revenue from investment in Company Shares Answer To record profit on equity investment Jun 30 Answer Case Answerd Answer Investment in Company Shares Answer To record dividends received on equity investment
