On March 20, 10,000 shares of Thorlite Company are acquired at a price of $30 per share plus a $250 brokerage fee

On March 20, 10,000 shares of Thorlite Company are acquired at a price of $30 per share plus a $250 brokerage fee. On May 30, a $0.25-per share dividend was received on the Thorlite Company stock. On June 15, 5,000 shares of the Thorlite Company stock were sold for $36 per share less a $200 brokerage fee. Prepare the journal entries for the original purchase, the dividend, and the sale under the cost method.


Answer:

Mar. 20 Investments—Thorlite Company Stock* 300,250
Cash 300,250
*(10,000 shares × $30 per share) + $250
May 30 Cash* 2,500
Dividend Revenue 2,500
*$0.25 per share × 10,000 shares
June 15 Cash* 179,800
Gain on Sale of Investments 29,675
Investments—Thorlite Company Stock** 150,125
*(5,000 shares × $36) – $200
**5,000 shares × ($300,250 ÷ 10,000 shares)