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On January 1 2020 Potter Company purchased 100 of the 1000 shares of Voldomort Company for...

On January 1 2020 Potter Company purchased 100 of the 1000 shares of Voldomort Company for $800. Potter has no significant influence over Voldomort
On July 1, 2020 Voldomort declared and paid a $1 per share dividend
On December 31st Voldomort's stock was selling for $9 per share; Voldomort reported income of $4000
On January 1 2021 Potter Company purchased 300 shares of Voldomort Company for $2700. Potter now has two seats on the Voldomort Board of Directors
On March 1, Voldomort had a two for one stock split.
On July 1, Voldomort declared and paid a $1 per share dividend
On December 31st Voldomort reported income of $5000 and its stock was selling for $7 per share
On July 1, 2022 Voldomort announced that it will not pay a dividend in 2022.
On December 31st Voldomort reported a loss of $2000 and its stock was selling for $5 per share
On January 3rd 2023 Potter sold all of its shares in Voldomort at $5.50 per share
REQUIRED:
A) MAKE THE REQUIRED JOURNAL ENTRIES FOR POTTER CONNECTED WITH ITS OWNERSHIP OF VOLDOMORT STOCK IN
2020
2021
2022
2023
B) FILL IN THE FOLLOWING TABLE
2020 2021 2022
Investment in Voldomort
income from investment in Voldomort

Solutions

Expert Solution

Some of the activities mentioned in question doesn't have journal entries as they don't make any transaction on Potter company

They are:

  • December 31st, 2020 stock price and income
  • March 1st, 2021 2-1 stock split
  • December 31st, 2021 stock price and income
  • July 1st, 2022 announcement of not paying dividend
  • December 31st, 2022 stock price and loss

On July 1st, 2021 it needs to be observed that there are 800 shares instead of 400 because prior to that there is 2-1 stock split which is not recorded in Journal.

Date Account Title or Description Debit Credit
Jan. 1, 2020 Bought 100 shares of Voldomort company @ $8 a share $     800.00
Cash $     800.00
Record purchase in stock
Jul. 1, 2020 Cash $     100.00
Dividends at $1 per share for 100 shares $     100.00
Record dividends income
Jan. 1, 2021 Bought 300 shares of Voldomort company @ $9 a share $ 2,700.00
Cash $ 2,700.00
Record purchase of stock
Jul. 1, 2021 Cash $     800.00
Dividends at $1 per share for 800 shares $     800.00
Record dividends income
Jan. 3, 2023 Cash $ 4,400.00
Sole 800 share of Voldomort @ $5.5 a share $ 4,400.00
Record sale of stock

As table in question is not quite visible I am assuming this will be the structure of table.

2020 2021 2022
Investment in Voldomort $     800.00 $ 2,700.00 $            -  
Income from investment in Voldomort $     100.00 $     800.00 $            -  

ekkarill92 answered 1 year ago
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