Review the following? long-term, available-for-sale security transactions of Roya Department? Stores: a. Purchased 460 shares of...

Review the following? long-term, available-for-sale security transactions of Roya Department? Stores:

a. Purchased 460 shares of Potter Fine Foods common stock at $ 32 per? share, with the intent of holding the stock for the indefinite future.

b. Received a cash dividend of $ 1.60 per share on the Potter Fine Foods investment.

c. At? year-end, adjusted the investment account to fair value of $ 39 per share.

d. Sold the Potter Fine Foods stock for the price of $ 20 per share.

Requirement

Journalize the? long-term, available-for-sale security transactions of Roya Department Stores.

(accounts to choose from in a-d are Allowance to adjust investment in AFSS to market, Cash, Dividend revenue, Gain on sale of investment in AFSS, investment in AFSS, Loss on Sale of investment in AFSS, Unrealized gain on investment in AFSS, and Unrealized loss on investment in AFSS)

a) Purchased 460 shares of Potter Fine Foods common stock at $32 per? share, with the intent of holding the stock for the indefinite future. ?(Abbreviation used:? AFSS, Available-for-sale securities. The company uses an allowance account to adjust available for sale investments to fair value. Record debits? first, then credits)

b) Received a cash dividend of $1.60 per share on the Potter Fine Foods investment.

c) At? year-end, adjusted the investment account to fair value of $39 per share.

d)Sold the Potter Fine Foods stock for the price of $20 per share.

-?First, prepare the journal entry to record any necessary eliminations.?

-Then journalize the sale.

Solutions

Expert Solution

Transaction	Account description	Debit	Credit
a	Investment in AFSS	$ 14,720
	Cash		$ 14,720
	(To record Purchase of shares)

Transaction	Account description	Debit	Credit
b	Cash	$ 736
	Dividend revenue		$ 736
	(To record Dividend Revenue)
1.60*460 = 736

Transaction	Account description	Debit	Credit
c	Investment in AFSS	$ 3,220
	Allowance to adjust investment in AFSS to market		$ 3,220
	(To record the market value adjustments)
(39-32)*460

Transaction	Account description	Debit	Credit
d	Allowance to adjust investment in AFSS to market	$ 3,220
	Investment in AFSS		$ 3,220
	(To reverse the Market Value Adjustment)

d	Cash	$ 9,200
	Loss on Sale of investment in AFSS	$ 5,520
	Investment in AFSS		$ 14,720
	(To record sale of investment)
(20460= 9220)(12460= 5520)

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