Q13E_1
Question
Accounting for equity investments
Captain Investments completed the following investment transactions during 2018:
Jan. 14 Purchased 200 shares of Velcon stock, paying \(53 per share. The investment represents 4% ownership in Velcon’s voting stock. Captain does not have significant influence over Velcon. Captain intends to hold the investment for the indefinite future.
Aug. 22 Received a cash dividend of \)0.28 per share on the Velcon stock.
Dec. 31 Adjusted the Velcon investment to its current market value of $58.
Requirements
Journalize the entries for 2018. Explanations are not required.
Step-by-Step Solution
VerifiedBoth sides of the Journal total $11,656.
The rights possessed by the common shareholders of the business entity are known as voting rights. The preferred shareholders do not possess such rights because they are not considered owners of the business.
Date | Accounts and Explanation | Debit $ | Credit $ |
14 Jan 2018 | Equity investment | $10,600 |
|
| Cash |
| $10,600 |
|
|
|
|
22 Aug 2018 | Cash | $56 |
|
| Dividend revenue |
| $56 |
|
|
|
|
31 Dec 2018 | Fair value adjustment | $1,000 |
|
| Unrealized holding gains |
| $1,000 |
|
|
|
|
| No Journal entry is made for undistributed net income. |
|
|
|
| $11,656 | $11,656 |