AC331 - practice questions and answer outline PDF

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On March 8 KC purchases 1,000 shares of HC at $4.25, with a 1.5% commission charged for the transaction. On July 11, KC sells 800 of the HC shares for $5.08 and pays a 1.5% commission. a) What cost should KC assign to the purchase when they are acquired? b) What would be the journal entry KC records on the date the shares are sold? Solution: a. KC should assign to the purchase when they are acquired: 1000 x $4.25 + 1000 x $4.25 x 1.5% = $#### (Recognize cost of investment at fair value of shares acquired (plus direct transaction costs)). b. The journal entry KC should record on the date the shares are sold: 800 x $5.08 – 800 x $5.08 x 1.5% = $## Deposal = $#### x 800/1000 = $### Gain/Loss of sales = $### -$##...