Question

On August 1, Blossom Company buys 1,000 shares of BCN common stock for $44,100 cash. On December 1, the stock investments are sold for $45,700 in cash. Journalize the purchase and sale of the common stock

Answer 1

Answer and Explanation:

The Journal entry is shown below:-

1. Stock Investments Dr, $44,100

           To Cash $44,100

(Being purchase of stock investment is recorded)

Here we debited the stock investment as the purchase is done and we credited the cash as  it decreased the asset

2. Cash Dr, $45,700

          To Stock Investments  $44,100

           To Gain on sale of stock Investments $1,600

(Being sale of stock investment is recorded)

Here we debited the cash as it increased the asset and we credited the stock investment and gain on sale of stock investment as there is a sale of common stock