Stock Investment Transactions at Wifty Company
What were the transactions Wifty Company had pertaining to stock investments?
Wifty Company had the following transactions related to stock investments:
- On February 1, purchased 1820 shares of Teal Mountain Company (10%) for $46,410 cash.
- On June 1, received cash dividends of $2 per share on Teal Mountain stock.
- On October 1, sold 1240 shares of Teal Mountain stock for $33,480.
Transactions and Dividends at Wifty Company
The entry to record the receipt of the dividends on June 1 would include a
Answer: Credit to Dividend Revenue for $3,640
In the case of Wifty Company's receipt of cash dividends on June 1, the entry made would result in a credit to Dividend Revenue for $3,640.
To explain further, when Wifty Company received cash dividends, they would credit Dividend Revenue with the total amount of $3,640. This amount was calculated based on the 1820 shares of Teal Mountain stock they purchased, and the $2 per share dividend they received.
This entry helps accurately record the income earned from the dividends and reflects it in the company's financial statements. It is a standard accounting practice to credit the revenue account when receiving dividends as it represents an increase in the company's earnings.
Overall, the receipt of dividends on June 1 by Wifty Company was recorded appropriately with a credit to Dividend Revenue for $3,640 in order to reflect the income earned from their stock investments.