Question

On February 15, Jewel Company buys 7,000 shares of Marcelo Corp. common stock at $28.53 per share. The stock is classified as a stock investment with insignificant influence. This is the company’s first and only stock investment. On March 15, Marcelo Corp. declares a dividend of $1.15 per share payable to stockholders of record on April 15. Jewel Company received the dividend on April 15 and ultimately sells half of the Marcelo Corp. stock on November 17 of the current year for $29.30 per share. The journal entry to record the sale of the 3,500 shares of stock on November 17 is:

Answer 1

The journal entry to record the sale of the 3,500 shares of stock on November 17 is as follows:

Debit Cash $102,550

Credit Investment in Marcelo Corp $99,855

Credit Gain from Sale of Investment $2,695

Data and Calculations:

February 15: Investment in Marcelo Corp $199,710 Cash $199,710 ($28.53 x 7,000)

April 15 Cash $8,050 Dividends Receivable $8,050

November 17: Cash $102,550 Investment in Marcelo Corp $99,855 Gain from Sale of Investment $2,695

Thus, the journal entry to record the sale of 3,500 shares is a debit to Cash, a credit to Investment, and a credit to Gain from Sale of Investment.

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