Sandhill Company had these transactions pertaining to stock investments:

Feb. 1 Purchased 1,257 shares of BJ common stock (2% of outstanding shares) for $8,799.

July 1 Received cash dividends of $2 per share on BJ common stock.

Sept. 1 Sold 490 shares of BJ common stock for $5,381.

Dec. 1 Received cash dividends of $1 per share on BJ common stock.

Required:

a. Journalize the transactions.

Answer and Explanation:

The journal entries are shown below:

On Feb 1

Stock investment Dr $8,799

To Cash $8,799

(Being the common stock is purchased)

On July 1

Cash Dr $2,514 (1,257 * $2)

To Dividend revenue $2,514

(Being the cash dividend received)

On Sep 1

Cash $5,381

To Stock investment $3,430 ($8,799 : 1,257 shares * 490 shares

To gain on sale $1,951

(Being the sale is recorded)

On Dec 1

Cash Dr $767 (1,257 shares - 490 shares)

To Dividend revenue $767

(Being the cash dividend received is recorded)