Question

Ellis Transport Company acquired 1.6 million shares of stock in L&K Corporation at $88 per share. They are classified by Ellis as "available for sale." Ellis sold 600,000 shares at $90, received a 10% stock dividend, and then later in the year sold another 100,000 shares at $87. Hint There is no entry for the stock dividend, but a new investment per share must be calculated for use later when the shares are sold. Required: Prepare journal entries to record these transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).) View transaction list Journal entry worksheet < 1 2 3 Record acquisition of shares in L & K Corporation. Note: Enter debits before credits. Event General Journal Debit Credit Record entry Clear entry View general journal

Answer 1

Solution:

Journal Entries - Ellis Transport Company (In millions)
Event	Particulars	Debit	Credit
1	Equity invesment Dr	$140.80
	To Cash		$140.80
	(To record investment in equity)
2	Cash Dr	$54.00
	To Equity investment		$52.80
	To Gain on sale of investment		$1.20
	(To record investment sold)
3	Cash Dr	$8.70
	To Equity investment ($88*0.1/1.1)		$8.00
	To Gain on sale of investment		$0.70
	(To record investment sold)