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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