Reference no: EM132728580
Question - What are the Journal entries for Reddenblack at December 31, 2019 relating to its investments? Can you please include explanation, for example how to determine the original cost per share.
On January 2, Reddenblack, Inc bought 2,000 shares of Green Corp's convertible $4 par, 5% preferred stock for $140,000. On that same day, the company also bought 10,000 shares (a 25% interest) in Blue Co.'s common stock for $820,000, as well as $120,000 of Purple Company's common stock (12,000 shares). On January 3, 2019, Reddenblack acquired $100,000 of 6% mortgage bonds of the Orange Corporation at their face, which it intends to hold until the bonds mature in 2025. These are the only investments that Reddenblack owns.
At December 31, 2019
- Purple Company reported earnings of $920,000, paid a cash dividend of $2 per share, and a market value of $12 per share.
- Green Corp. reported earnings of $743,000, paid its preferred dividend in cash to all shareholders, and had a market value of $65 per share.
- Orange Corporation reported a net loss from operations of $21,000, paid its annual interest to bondholders in cash, and had a market value of $97.
- Blue Co. reported earnings of $560,000 for the year, paid cash dividend of $3 per share, and had a market value of $86 per share.