For the following transactions involving investments in marketable securities, a
ID: 2578386 • Letter: F
Question
For the following transactions involving investments in marketable securities, assume that: a. Investments are classified as trading.
(1) Ohlson Co. purchases 5,200 common shares of Freeman Co. at $16 cash per share.
(2) Ohlson Co. receives a cash dividend of $1.25 per common share from Freeman.
(3) Year-end market price of Freeman common stock is $17.5 per share.
(4) Ohlson Co. sells all 5,200 common shares of Freeman for $86,600 cash.
(i) prepare journal entries to record the four transactions,
(ii) post the journal entries to their respective T-accounts, and
(iii) record each of the transactions in the financial statement effects template.
Explanation / Answer
Trans Accounts Title Dr Cr 1 Trading securities 83200 Cash (5200*16) 83200 2 Cash 6500 Dividend Revenue (5200*1.25) 6500 3 Trading securities 7800 Unrealized gain on securities-Income 7800 (5200*1.5) 4 Cash 86600 Realized loss on sale of securities 4400 Trading securities 91000 Cash 2) 6500 1) 83200 4) 86600 Dividend Revenue 2) 6500 Trading securities 1) 83200 4) 91000 3) 7800 Unrealized gain on securities-Income 3) 7800 Realized loss on sale of securities 4) 4400 Assets Liabilties Stockholder equity Revenue Expenses 1 -83200 83200 2 6500 6500 6500 3 7800 7800 7800 4 -91000 -4400 4400