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Chapter 10: 3TI (page 554)

On May 15, 2018, Mayer Co. invests \(8,000 in John, Inc. stock. John pays Mayer a \)200 dividend on November 15, 2018. Mayer sells the John stock on December 10, 2018, for $7,500. Assume the Mayer Co. does not have significant influence over John, Inc. Journalize the 2018 transactions related to Mayer’s investment in John stock.

Short Answer

Expert verified

Both sides of the journal total$16,200.

Step by step solution

01

Definition of Equity Investment

The investment done by purchasing the company’s equity shares is known as an equity investment. Equity investment might provide controlling interest or non-controlling interest.

02

Journal Entries for Recording the Investment in John Stock

Date

Accounts and Explanation

Debit $

Credit $

15 May 2018

Equity investment

$8,000

Cash

$8,000

15 Nov 2018

Cash

$200

Dividend revenue

$200

10 Dec 2018

Cash

$7,500

Loss on disposal

$500

Equity investment

$8,000

Total

$16,200

$16,200

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Most popular questions from this chapter

9 Accounting for debt investments

Advance & Co. owns vast amounts of corporate bonds. Suppose Advance buys $1,100,000 of FermaCo bonds at face value on January 2, 2018. The FermaCo bonds pay interest at the annual rate of 3% on June 30 and December 31 and mature on December 31, 2037. Advance intends to hold the investment until maturity.

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Question: P10-20A Accounting for equity investments

The beginning balance sheet of Waterfall Source Co. included a \(400,000 investment in Evan stock (20% ownership, Waterfall has significant influence over Evan). During the year, Waterfall Source completed the following investment transactions:

Mar. 3 Purchased 4,000 shares at \)11 per share of Lili Software common stock as a long-term equity investment, representing 7% ownership, no significant influence.

May 15 Received a cash dividend of \(0.61 per share on the Lili investment.

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Question: P10-22B Classifying and accounting for debt and equity investments

Captain Transfer Corporation generated excess cash and invested in securities as follows:

2018

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Aug. 21 Received a cash dividend of \)0.40 per share on the Nardon stock investment.

Sep. 16 Sold the Naradon stock for \(13.70 per share.

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Question: P10-21B Accounting for debt investments

Suppose Hale and Sons purchases $800,000 of 3.5% annual bonds of Tyson Way Corporation at face value on January 1, 2018. These bonds pay interest on June 30 and December 31 each year. They mature on December 31, 2022. Hale and Sons intends to hold the Tyson Way bond investment until maturity.

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2. Journalize the entry required on the Tyson Way bonds maturity date. (Assume the last interest payment has already been recorded.)
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