Question

Hulse Company had the following transactions pertaining to stock investments. Feb. 1 Purchased 600 shares of Wade common stock (2%) for $7,200 cash. July 1 Received cash dividends of $1 per share on Wade common stock. Sept. 1 Sold 300 shares of Wade common stock for $4,300. Dec. 1 Received cash dividends of $1 per share on Wade common stock. Instructions (a) Journalize the transactions. (b) Explain how dividend revenue and the gain (loss) on sale should be reported in the income statement.

Answer 1

Answer:

(a)

                          Dr.          Cr.

Feb 1

Investment     $7,200

Cash                            $7,200

Jul 1

Cash               $600

Dividend Income        $600

Sep 1

Cash               $4,300

Gain on sale                 $700

Investment                  $3,600

(b) Dividend will be shown as other income in the revenue section of Income statement.  Gain on sale of common share will be reported on income statement after operating profit.

Explanation:

Per Share Purchase Price = 7200 / 600 = $12

300 Shares Purchase Price =  $12 x 300 = 3,600