Question

On March 1, 2016, Rain Technology purchased 20,000 shares of Lightyear Services Company for $ 10 per share. The following information applies to the stock price of Lightyear Services:
Required:
(b) Prepare journal entries to record the facts in the case, assuming that Rain purchased the shares for the available-for-sale securities portfolio.

Answer 1

The journal entry to record the purchase the shares is that investment account will be debited with $200000 and bank account credited with $200000.

Given that on March 1, 2016, Rain Technology purchased 20,000 shares of Lightyear Services Company for $ 10 per share.

We are required to pass a journal entry for the recording of the purchase of the shares.

Journal is the book in which the transaction is recorded first time in the company. It helps in the formation of ledger as well as other books also.

The journal entry will be as under:

1) Investment A/c Dr.    $200000

       To Bank A/c                     $200000

    (Purchase of shares by Rain Technology)

Hence the journal entry to record the purchase the shares is that investment account will be debited with $200000 and bank account credited with $200000.

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