Arkansas Company purchased 20,000 shares of Mena Companys common stock on May 15, 2002. Arkansas paid $380,000

Question:

Arkansas Company purchased 20,000 shares of Mena Company’s common stock on May 15, 2002. Arkansas paid $380,000 for the stock. On September 12, 2002, Arkansas received a dividend check from Mena for $12,000. The market value of Mena’s stock on December 31, 2002 was $24 per share. On September 12, 2003, Arkansas received a dividend check from Mena for $14,400. The market value of Mena’s stock on December 31, 2003 was $22 per share. Arkansas sold its investment in Mena’s stock on April 6, 2004, for $400,000. Throughout this period, Arkansas Company owned 8% of Mena’s stock and intended for it to be a long-term investment.

1. Using the format presented in this chapter, record all transactions for Arkansas Company involving its investment in Mena and explain the purpose of each transaction.

2. Determine the amounts Arkansas Company would report on its 2002 and 2003 balance sheets (or notes) for its investment in Mena.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...