On February 22, Stewart Corporation acquired 12,000 shares of the 400,000 outstanding shares of Edwards Co. common stock at $50 plus commission charges of $120. On June 1, a cash dividend of $1.40 per share was received. On November 12, 4,000 shares were sold at $62 less commission charges of $100.

Using the cost method, journalize the entry for the purchase of stock.

Answer

The Journal entry and their narrations is shown below:-

Explanation:

The Journal entry is shown below:-

Investment in shares Dr,     $600,120

(12,000 × $50 + $120)

      To Cash                                     $600,120

(Being purchase of 12,000 shares and commission of $120 is recorded)

For recording the purchase of stock we simply debited investment shares and credited cash.

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