Question

In: Accounting

On March 1, 2016, Emma's Toy Store purchased Toy Maker's stock for $33,400, as a short-term...

On March 1, 2016, Emma's Toy Store purchased Toy Maker's stock for $33,400, as a short-term available-for-sale security. On April 10, dividends of $1,075 were received from the Toy Maker's stock. On December 31, 2016, the end of Emma's Toy Store's accounting year, the Toy Maker's stock had a fair value of $34,300. On January 1, 2017, Emma's Toy Store sold all of the Toy Maker's stock for $35,000.

Prepare the journal entries needed to record the transactions for 2016 and 2017. Explanations are not required.

Solutions

Expert Solution

Solution:

Journal Entries
Date Particulars Debit Credit
1-Mar-16 Investment in Toy Maker's Stock - Available for Sale Dr $33,400.00
             To Cash $33,400.00
(Being investment made in Toy Maker's stock)
10-Apr-16 Cash A/c Dr $1,075.00
             To Dividend Income $1,075.00
(Being dividend received on Maker' Stock)
31-Dec-16 Investment in Toy Maker's Stock - Available for Sale Dr ($34,300 - $33,400) $900.00
             To Fair value adjustment (Other comprehensive Income) $900.00
(Being fair value adjustment on AFS securities)
1-Jan-17 Investment in Toy Maker's Stock - Available for Sale Dr ($35,000 - $34,300) $700.00
Fair value adjustment (Other comprehensive Income) Dr $900.00
             To Gain on available for sale securities $1,600.00
(Being gain on available for sale securities recognized)
1-Jan-17 Cash A/c Dr $35,000.00
             To Investment in Toy Maker's Stock - Available for Sale $35,000.00
(Being investment in Toy maker's stock sold)

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