1. On November 28, 20x7, Barrett Company purchased 20,000 shares of HAL Corporation common stock for...

1. On November 28, 20x7, Barrett Company purchased 20,000 shares of HAL Corporation common stock for $360,000. Barrett's management intends to hold the shares for a short period of time. On December 31, 20x7, the price of HAL stock was $15 per share. Finally, on January 19, 20x8, Barrett sells all 20,000 shares for $375,000. Prepare Barrett's journal entries for November 28, December 31, and January 19.

Expert Solution


Journal entries

Event	Dr/Cr	Particulars	Debit $	Credit $
November 28 20x7	Debit	Investment in HAL Corporation	360,000
	Credit	Cash/Bank		360,000
		(To record the purchase of equity shares of HAL Corporation for short term purpose)
		=20,000 shares at $ 18 per share

December 31, 20x7	Debit	Unrealized loss on revaluation	60,000
	Credit	Investment in HAL Corporation		60,000
		(To record the revaluation of short term investment at the end of reporting period which will go to the income statement)
Please note that short term investment gain or loss will go to income statement

January 19, 20x8	Debit	Cash/Bank	375,000
	Credit	Gain on sale of investments		75,000
	Credit	Investment in HAL Corporation		300,000
		(To record the sale of investment in HAL corporation and gain on sale of investment)

ekkarill92 answered 1 year ago

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