>> Accounting Basics
Question - Dream Corporation generated excess cash and invested in securities, as follows:
Jul. 2 Purchased 3,600 shares of Bravo, Inc. common stock at $ 13.00 per share. Dream holds the stock in its active trading account and plans to sell the stock within three months, when the company will need the cash for normal operations.
Aug. 21 Received a cash dividend of $ 0.30 per share on the Bravo stock investment.
Sep. 16 Sold the Bravo stock for $ 13.60 per share.
Oct. 8 Purchased 500 shares of Zigbo stock at $ 10.00 per share. The stock is held in the active trading account as Dream plans to hold the Zigbo stock for less than five months.
Dec. 31 Zigbo stock's current market price is $ 9.00 per share.
1. Classify each of the investments made during 2014. (Assume the investments represent less than 20% of ownership of outstanding voting stock.)
2. Journalize the 2014 transactions. Explanations are not required.
3. Prepare T-accounts for the investment assets and show how to report the investments on Dreams balance sheet at December 31, 2014.