Question

Oriole Company had these transactions pertaining to stock investments: Feb. 1 Purchased 2700 shares of Ayayai Company (10%) for $68850 cash. June 1 Received cash dividends of $3 per share on Ayayai stock. Oct. 1 Sold 1890 shares of Ayayai stock for $51630 less brokerage fees of $600. The entry to record the sale of the stock would include a

Answer 1

Answer and Explanation:

The journal entry for recording the sale of the stock is shown below:

Cash Dr ($51,630 - $600) $51,030

    To Investment ($68,850 × 1890 ÷ 2700) $48,195

    To Gain on sale of investment $2,835

(Being the sale of the stock is recorded)

Here the cash is debited as it increased the assets, the investment and gain is credited as it reduced the assets but increased the revenue