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On February 15,Jewel Company buys 7,000 shares of Marcelo Corp.common stock at $28.53 per share.The stock is classified as a stock investment with insignificant influence.This is the company's first and only stock investment.On March 15,Marcelo Corp.declares a dividend of $1.15 per share payable to stockholders of record on April 15.Jewel Company received the dividend on April 15 and ultimately sells half of the Marcelo Corp.stock on November 17 of the current year for $29.30 per share.The journal entry to record the sale of the 3,500 shares of stock on November 17 is:
A) Debit Cash $102,550; debit Loss on Sale of Stock Investments $2,445; credit Stock Investments $104,99.
B) Debit Cash $102,550; credit Long-Term Investments-Trading $99,855; debit Gain on Sale of Long-Term Investments $2,695.
C) Debit Cash $102,550; credit Long-Term Investments-AFS $100,055; credit Gain on Sale of Long-Term Investments $2,495.
D) Debit Cash $102,550; credit Stock Investments $99,855; credit Gain on Sale of Stock Investments $2,695.
E) Debit Cash $102,550; credit Long-Term Investments-Trading $99,855; credit Gain on Sale of Long-Term Investments $2,695.
Stock Investments
Refers to the purchasing of shares in companies with the expectation of earning a return through dividends, share price appreciation, or both.
Loss on Sale
The financial loss incurred when the selling price of an asset is less than its carrying value on the balance sheet.
Gain on Sale
A financial gain that occurs when the selling price of an asset exceeds its purchase price or book value.
- Differentiate between the accounting methods for equity investments contingent upon the degree of control (minimal, considerable, and dominant).
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Learning Objectives
- Differentiate between the accounting methods for equity investments contingent upon the degree of control (minimal, considerable, and dominant).
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