Question

Diann Ltd. had the following transactions pertaining to share investments.

Feb.	1	Purchased 600 ordinary shares of Ronn (2%) for £6,200.
July	1	Received cash dividends of £1 per share on Ronn ordinary shares.
Sept.	1	Sold 300 ordinary shares of Ronn for £4,300.
Dec.	1	Received cash dividends of £1 per share on Ronn ordinary shares.

Instructions:

a. Journalize the transactions.

b. Explain how dividend revenue and the gain (loss) on sale should be reported in the income statement.

Answer 1

Answer
a
Feb-01	Stock Investment		$     6,200
	Cash			$     6,200
	To record investment purchased
Jul-01	Cash		$        600
	Dividend Revenue			$        600
	To record dividend received
Sep-01	Cash		$     4,300
	Stock Investment			$     4,000
	Gain on sale of investment			$        300
	To record sale of investment
Dec-01	Cash		$        300
	Dividend Revenue			$        300
	To record dividend received
b.
Dividend revenue and the gain on sale is to be reported under other revenues and gains in the income statement.