The Ravens Corporation obtained an investment in the stock of the Dallas Cowboys
The Ravens Corporation obtained an investment in the stock of the Dallas Cowboys. The intent of the investment was not to obtain control or to exert significant influence. The Ravens has no plans to trade the investment for near-term profits. Following is a description of the activity related to the investment in the Dallas Cowboys:
Aug. 5 | Purchased 10,000 shares of the Dallas Cowboys at $9 per share. |
Aug. 31 | The fair value of the Dallas Cowboys stock was $10 per share. |
Sept. 30 | The fair value of the Dallas Cowboys stock was $8.50 per share. |
Oct. 15 | Received a dividend from the Dallas Cowboys of $0.25 per share. |
Oct. 31 | The fair value of the Dallas Cowboys stock was $9.50 per share. |
Part A: Prepare journal entries for the activity pertaining to the investment in the Dallas Cowboys on each of the dates listed below. If no entry is required, indicate “No Entry”.
- August 5th
- August 31st
- September 30th
- October 15th
- October 31st
Part B:
If the investment were obtained with the objective of near-term trading for profit, what would be done differently? Entries are not required; just explain the applicable accounting treatment.
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Rating:
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Solution: The Ravens Corporation obtained an investment in the stock of the Dallas Cowboys