Everyday fresh is a retail outlet that sells its products at a discounted rate. It expands its product base to a new division th
at primarily sells stationery. Jason buys a set of pencils and erasers and assumes that these products must have a discount too. This kind of reasoning is said to be ________.
<span>This kind of reasoning is said to be deductive reasoning. Deductive reasoning is making or drawing a conclusion from other statements. In this case, items in the store are all discounted so it is easy to assume that the items Jason wants to buy are also on sale.</span>
Raw materials is an asset account with a debit balance, and since we must decrease it, we have to credit the amounts. Work in progress (WIP) inventory is an asset account so it has a debit balance.
(to record the acquired of 10,000 Tolle's shares at $30 each and a brokerage cost of $100)
April 12th
Dr Cash 5,000
Cr Dividend Revenue 5,000
(to record dividend revenue from 10,00 Tolle's shares at $0.5 each)
June 10th
Dr Cash 135,900
Cr Investment on Tolle 120,040
Cr Gain on investment disposal 15,860
(to record the sales of 4,000 Tolle's shares at $34 plus $110 commission fees incurred).
Explanation:
All the explanation is given at the end of each transaction. Further explanation as below:
Given there is no information mentioned whether the share acquired is fro 20% to above and the partial disposal of the investment comes quite near to the time of first acquire; we apply the Cost Method for accounting these transactions.
In the June 10th transaction, we have:
- The actual selling price per share = (Selling price x share sold - Brokerage commission) / share sold = ( 34 x 4,000 - 100) / 4,000 = $33.975;
- The cost of share sold per share = ( Purchasing price x share purchase - Brokerage commission)/ share purchased = ( 30 x 10,000 + 100) / 10,000 = $30.01
=> Cost of share recorded ( Cr Investment account) = 30.01 x 4,000 = 120,040;
=> Gain on investment disposal = ( 33.975 - 30.01) x 4,000 = 15,860.
