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on february 22, stewart corporation acquired 12,000 shares of the 400,000 outstanding shares of edwards co. common stock at $50 plus commission charges of $120. on june 1, a cash dividend of $1.40 per share was received. on november 12, 4,000 shares were sold at $62 less commission charges of $100. using the cost method, journalize the entries for (a) the purchase of stock, (b) the receipt of dividends, and (c) the sale of 4,000 shares. refer to the chart of accounts for exact wording of account titles.

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The official record of every company activity is a journal entry. A transaction is, in the broadest sense, any financial activity that has an impact on the firm.

a) Journalize the entry for the purchase of stock as shown below:

Date

Feb. 22

Accounts Titles and Explanation

Investment in shares of E Co. (12,000*$50 +$120)

Debit (S)

$600,120|

To Cash

$600,120

(To record the purchase of 12,000 shares and commission of $120)

b) Journalize the entry for the entry for the receipt of dividends as shown below:

Date

June. 22

Accounts Titles and Explanation

Cash Dr. ($1.40*12,000). $16,800

To Dividend. $16,800

(To record the receipt of dividend)

c) Journalize the entry for the entry for the sale as shown below:

Date

12-Nov

Accounts Titles and Explanation

Cash (4,000*$62 - $100)

$247,900

Profit on sale

$47,860

To Investment in shares of E Co. $200,040

(To record the sale of shares)

Working Note:

Cost of shares sold-

$600,120 12.000 shares -x 4,000 shares

= $200,040.

Profit on sale $247.900-$200,040

= $47,860

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