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Investments, Stocks, Shares and Dividends

P17-11 (Equity Investments?Available for Sale) Big Brother Holdings, Inc. had the following available-for-sale investment portfolio at January 1, 2002.

Earl Company 1,000 shares @ $15 each $15,000
Josie Company 900 shares @ $20 each 18,000
David Company 500 shares @ $9 each 4,500
Available-for sale securities @ cost 37,500
Securities fair value adjustment?Available-for-sale (7,500)

Available-for-sale securities @ fair value $30,000

During 2002, the following transactions took place.
1. On March 1, Josie Company paid a $2 per share dividend.

2. On April 30, Big Brother Holdings, Inc. sold 300 shares of David Company for $10 per share.

3. On May 15, Big Brother Holdings, Inc. purchased 50 more shares of Earl Co. stock at $16 per share.

4. At December 31, 2002, the stocks had the following price per share values: Earl $17, Josie $19, and David $8.

During 2003, the following transactions took place.

5. On February 1, Big Brother Holdings, Inc. sold the remaining David shares for $7 per share.

6. On March 1, Josie Company paid a $2 per share dividend.

7. On December 21, Earl Company declared a cash dividend of $3 per share to be paid in the next
month.

8. At December 31, 2003, the stocks had the following price per shares values: Earl $19 and Josie $21.

Instructions

(a) Prepare journal entries for each of the above transactions.

(b) Prepare a partial balance sheet showing the Investments account at December 31, 2002 and 2003.

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Solution Summary

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