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On September 12, 3,800 shares of Aspen Company are acquired at a price of $43.00 per...

On September 12, 3,800 shares of Aspen Company are acquired at a price of $43.00 per share plus a $190 brokerage commission. On October 15, a $1.10-per-share dividend was received on the Aspen Company stock. On November 10, 1,520.00 shares of the Aspen Company stock were sold for $36 per share less a $76 brokerage commission. When required, round final answers to the nearest dollar. For a compound transaction, if an amount box does not require an entry, leave it blank. Prepare the journal entries for the original purchase, the dividend, and the sale under the cost method.

Sept. 12

Oct. 15

Nov. 10

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Aspen Company
Workings
As cost method is used so brokerage will also be added to cost of investment.
Calculation of cost of investment: Amount $ Note
Price per share             43.00 A
Number of shares purchased        3,800.00 B
Purchase cost of investment 163,400.00 C=A*B
Add: Brokerage           190.00 D
Cost of investment 163,590.00 E=C-D
Cost of one share             43.05 F=E/A
As cost method is used so dividend will be treated as income from investment and will not be deducted from cost of investment.
Dividend per share                1.10 G
Number of shares purchased        3,800.00 See B
Dividend income        4,180.00 H=G*B
Sell price per share             36.00 I
Number of shares sold        1,520.00 J
Sale value of shares     54,720.00 K=I*J
Less: Brokerage expense             76.00 L
Cash received     54,644.00 M=K-L
Cost of one share             43.05 See F
Number of shares sold        1,520.00 See J
Cost of shares sold     65,436.00 N=F*J
Loss on sale of investment     10,716.00 O=N-K
Journal Entries
Date Account Debit $ Credit $ Remarks
12-Sep Investment in available for sale securities- Aspen Company 163,590.00 See Note C
Cash 163,590.00
15-Oct Cash       4,180.00 See Note H
Dividend Income       4,180.00
10-Nov Cash     54,644.00 See Note K
Brokerage expense             76.00 See Note L
Loss on sale of Investment in available for sale securities- Aspen Company     10,716.00 See Note O
Investment in available for sale securities- Aspen Company     65,436.00 See Note N

ekkarill92 answered 1 year ago
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