Journalize the Entries to Record the Transactions of Investment

These are journal entries of  2 years'  investments transactions. Rules of double entry system will apply on these investment transactions. See detail problem before getting its solution.

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Detail of Question
In problem PR 15-1A I need help find out to work the part one and part 2 of the problem.

In acct 2 text book warren reeve duchac accounting 23e. pages 697-698-- roman products, Inc. is a wholesaler of men hair products. the company began operations on Jan. 1, 2010. the following transactions relate to securities acquired by roman products inc. which has a fiscal year ending in Dec.31 2010. I am in need of how to work out the excel problems .

Year 2010

jan.3 purchased 3000 shares of whalen inc. as an available for sale investment at $46 per share including the brokerage commission

july 6 split whalen inc. stock 2 for 1 and received the regular cash dividend of $0.60 per share on the whalen inc. stock after the split.

Oct. 14 sold 900 shares of whalen inc stock at $25 per share , less a brokerage commission of $50.

Dec. 9 Received the regular cash dividend of $0.60 per share .

Dec. 31  Whalen inc. is classified as an available for sale investment and is adjusted to fair value of $21 per share. Use the Valuation allowance for available for sale investment account in making the adjustment.

Year 2011

Jan 5 Purchased an influential interest in Tasmania co. for $620,000 by purchasing 60,000 shares directly from the estate of the founder of Tasmania . there are 150,000 share of Tasmania Co. stock outstanding .

July 8. received the regular cash divided of $0.70 per share on whalen inc. stock.

Dec.8. received the regular cash dividend of $0.70 per share plus an extra dividend of $0.15 per share on whalen inc. stock.

31 received $18,000 of cash dividends on Tasmania Co. stock Tasmania Co. reported net income of $74,000 in 2011. Roman products uses the equity method of accounting for its investment in Tasmania Co.

31. Whalen Inc. is classified as an available for sale investment and is adjusted to fair value of $26 per share. use the valuation allowance for available for sale investments account in making the adjustment.

You have to :

1. Journalize the entries to record the preceding transactions.



Journal Entries 

Jan. 3,  2010

Shares Investments in Whalen Inc. Dr. 138000

Bank Account Cr. 138000

July 6, 2010

Now, when in 6 july 2010, shares' stock will be split 2 for every 1, it means number of shares will be double. So, dividend will increase as per this rule

Dividend Received

3000 X 2 X 0.60 = $ 3600

Bank Account Dr. 3600

Dividend Received Account Cr.3600

Oct. 14, 2010 

Sold 900 shares @ $ 25 per share less brokerage commission $ 50

If we want to calculate the profit on this sale, we have to calculate the real cost of these shares.

Cost of 900 shares

= 138000 X 900/ 6000 = $ 20700

Net sale value of 900 shares = (900 X $ 25 ) - $50 = $ 22450

Profit on sale of 900 shares = $ 1750

Bank Account Dr. 22450

Share investment in Whalen Inc. Cr. 20700

Profit on Sale of Share Investment in Whalen Inc. Cr. 1750

Dec. 9, 2010

Balance shares in hand = 6000 -900 = 5100

Dividend = 0.60 x 5100 =$ 3060

Bank Account Dr. 3060

Dividend Received Cr. 3060

Dec. 31, 2010

 Fair Value of Per share after sale

= ( 138000 - 20700 )/ 5100 =  $ 23 per share

New fair value = $ 21

Unrealized loss due to changing  fair value

= $ 23 -$ 21 = $ 2

5100 X 2 =  $ 10200

Unrealized loss of shares investment in Whalen Inc. Dr. 10200

Valuation Allowance for Available-for-Sale Investment Cr. 10200

Jan. 5, 2011

 Investments in Tasmania Co. Dr. 620000

Bank Account Cr. 620000

July 8, 2011

Balance shares in hand = 6000 -900 = 5100

Dividend = 0.70 x 5100 = $ 3570

Bank Account Dr. 3570

Dividend Received from Whalen Inc.  Cr. 3570

Dec. 8, 2011

Balance shares in hand = 6000 -900 = 5100

Dividend = (0.70+ 0.15) x 5100 = $ 4335

Bank Account Dr. 4335

Dividend Received from Whalen Inc.  Cr. 4335

Dec. 31, 2011 

Bank Account Dr. 18,000
Investment in Tasmania Inc.  Cr.18,000

Dec. 31, 2011

.Fair value increased from $ 21 per share to $ 26 per share

Unrealized gain due to changing  fair value

= $ 26 -$ 21 = $ 5

5100 X 5 =  $ 25500

Valuation Allowance for Available-for-Sale Investment Dr. 25500

Unrealized Gain of shares investment in Whalen Inc. Cr. 25500


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Accounting Education: Journalize the Entries to Record the Transactions of Investment
Journalize the Entries to Record the Transactions of Investment
Accounting Education
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