Question
The following investment transactions happened during the fiscal year ending December 31, 2018 for Dolly Company. Jan 2 Purchased 30,000 shares of common stock of
The following investment transactions happened during the fiscal year ending December 31, 2018 for Dolly Company.
Jan 2 Purchased 30,000 shares of common stock of Vita Company at $10 per share, plus a brokerage fee of $3,000. Dolly Company does not have a significant influence on Vita Company, and classified this investment as long-term.
Feb 26 Purchased 25,000 shares of common stock of Farie Inc. at $38 per share. Because this investment represents 25% of Faries total outstanding shares, it gives Dolly Company a significant influence over Farie Inc.
Mar 31 Received $12,500 in dividends from Farie Inc.
Apr 19 Received a cash dividend of $2 per share from Vita Company.
May 5 Purchased 1,000 shares of common stock of Tartan Corp. at $22 per share. Dolly Company does not have a significant influence on Tartan Company, and classified this investment as short-term.
Jun 13 Sold 5,000 shares of common stock of Vita Company at $11.50 per share
Jul 31 Farie Inc. reported a net income of $400,000 for its fiscal year ending July 31, 2018.
Aug 16 Received a cash dividend of $0.50 per share from Tartan Corp.
Sep 24 Sold half of Tartan Corp. shares of common stock at $25 per share.
Oct 31 Purchased $100,000, 15-year, 6% bonds at par value. Dolly Company paid a total of $100,500 for these bonds because the bonds came with $500 accrued interest as of the purchase date. Dolly Company intends to hold these bonds until maturity.
Dec 31 Accrued interest revenue on the bonds purchased on October 31.
Dec 31 The market values for Vita Company and Tartan Corp. shares of common stock are $9 and $24, respectively.
- Prepare journal entries for the above transactions.
Date | Account Title and Explanation | Debit | Credit |
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b) Prepare a partial income statement for Dolly Company for the year ended December 31, 2018 that starts at $700,000 for income from operations. Assume that Dolly Companys income tax rate is 30%
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