PASSIVE INVESTMENT - EQUITY SECURITIES The following investment activities relate to Bellows Corp. Bellows has a...
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PASSIVE INVESTMENT - EQUITY SECURITIES The following investment activities relate to Bellows Corp. Bellows has a December 31 year end. Year 1: June 15 September 15 Bellows Corp. acquired 100 shares of Sonny, Inc. for $75 per share. The purchase represented 5% of the outstanding shares of Sonny, Inc. Bellows Corp. received dividends of $2 per share from Sonny, Inc. The value of the Sonny stock at December 31, Year 1 was $120 per share. December 31 Year 2: February 17 Bellows sold the stock in Sonny, Inc. for $115 per share a. For Year 1, prepare all journal and adjusting entries related to the investment in Sonny, Inc. Date Accounts Debit Credit b. Post all Year 1 entries above to the T-accounts below. The beginning Cash balance is given. Beg. + Cash (A) - 100,000 HANDOUT D-1 (continued) c. Prepare all journal and adjusting entries related to the investment in Sonny, Inc. for Year 2. Date Accounts Debit Credit d. Post the Year 2 journal entry above to the T-accounts below. Start by carrying forward the ending balances determined in requirement b. Do not carry forward any income statement account balances from Year 1; assume all Year 1 temporary accounts have been closed. PASSIVE INVESTMENT - EQUITY SECURITIES The following investment activities relate to Bellows Corp. Bellows has a December 31 year end. Year 1: June 15 September 15 Bellows Corp. acquired 100 shares of Sonny, Inc. for $75 per share. The purchase represented 5% of the outstanding shares of Sonny, Inc. Bellows Corp. received dividends of $2 per share from Sonny, Inc. The value of the Sonny stock at December 31, Year 1 was $120 per share. December 31 Year 2: February 17 Bellows sold the stock in Sonny, Inc. for $115 per share a. For Year 1, prepare all journal and adjusting entries related to the investment in Sonny, Inc. Date Accounts Debit Credit b. Post all Year 1 entries above to the T-accounts below. The beginning Cash balance is given. Beg. + Cash (A) - 100,000 HANDOUT D-1 (continued) c. Prepare all journal and adjusting entries related to the investment in Sonny, Inc. for Year 2. Date Accounts Debit Credit d. Post the Year 2 journal entry above to the T-accounts below. Start by carrying forward the ending balances determined in requirement b. Do not carry forward any income statement account balances from Year 1; assume all Year 1 temporary accounts have been closed.
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