Question

On August 15, 2014, Cubs Corp. purchases 5,000 shares of common stock in Sox Inc. at a mar- ket price of $15 per share. In addition, Cubs pays brokerage fees of $1,000. On October 20, 2014, Cubs sells the Sox stock for $10 per share.
Required

Prepare all necessary entries on Cubs’s books in connection with the investment beginning with the purchase of the common stock on August 15, 2014, and the sale on October 20, 2014.

Answer 1

Answer:

                                               Debit                                       Credit

Common Stock                       75,000

Cash                                                                                        75,000

Brokerage fees                        1,000

Cash                                                                                         1,000

Cash                                        50,000

Loss on sale of common stock 25,000

Common Stock                                                                         75,000

Explanation:

5000*15= 75,000

5,000*10= 50,000

75,000-50,000= 25,000