Athletic Accessories has the following transactions related to investments in common stock. May 1Purchases 5,000 shares (insignificant influence) of Endurance Wear ?common stock for $22 per share. June 30Receives a cash dividend of $1 per share.October 18Sells 2,000 shares of Endurance Wear common stock at $25 per share.December 31Adjusts the investments to fair value. The fair value of Endurance Wear ?common stock is now $30 per share.1.Record each of these transactions, including an entry on December 31 to adjust the investment to fair value. 2.Calculate the balance of the investment account on December 31.
What will be an ideal response?
May 1
| Investments | 110,000 | ? |
| Cash | ? | 110,000 |
($22 × 5,000 shares)
June 30
| Cash | 5,000 | ? |
| Dividend revenue | ? | 5,000 |
($1 × 5,000 shares)
October 18
| Cash ($25 × 2,000 shares) | 50,000 | ? |
| Investments ($22 × 2,000 shares) | ? | 44,000 |
| Gain (difference) | ? | 6,000 |
December 31
| Investments | 24,000 | ? |
| Unrealized Holding Gain-Net Income | ? | 24,000 |
($8 × 3,000 shares)
The balance in the Investments account on December 31 is $90,000, equal to the 3,000 remaining shares times $30 per share fair value. The balance in the Investments account can be verified by posting all transactions to a T-account.
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