On February 15, Jewel Company buys 7,000 shares of Marcelo Corp. common stock at $28.53 per share plus a brokerage fee of $400. The stock is classified as available-for-sale securities. This is the company's first and only investment in available-for-sale securities. On March 15, Marcelo Corp. declares a dividend of $1.15 per share payable to stockholders of record on April 15. Jewel Company received the dividend on April 15 and ultimately sells half of the Marcelo Corp. stock on November 17 of the current year for $29.30 per share less a brokerage fee of $250.
-The journal entry to record the sale of the 3,500 shares of stock on November 17 is:

Question

On February 15, Jewel Company buys 7,000 shares of Marcelo Corp. common stock at $28.53 per share plus a brokerage fee of $400. The stock is classified as available-for-sale securities. This is the company's first and only investment in available-for-sale securities. On March 15, Marcelo Corp. declares a dividend of $1.15 per share payable to stockholders of record on April 15. Jewel Company received the dividend on April 15 and ultimately sells half of the Marcelo Corp. stock on November 17 of the current year for $29.30 per share less a brokerage fee of $250. 
-The journal entry to record the sale of the 3,500 shares of stock on November 17 is:

Quizplus · Accepted Answer

The purchase of the 7,000 shares of Marcelo Corp. stock on February 15 is recorded as follows:

Debit Long-Term Investments-AFS $200,450
Debit Brokerage Fees $400
Credit Cash $200,850

On March 15, when the dividend is declared, no journal entry is necessary. On April 15, when the dividend is received, the following journal entry is recorded:

Debit Cash $8,050
Credit Dividend Revenue $8,050

On November 17, when half of the Marcelo Corp. stock is sold, the journal entry is:

Debit Cash $102,300
Credit Long-Term Investments-AFS $100,055
Credit Gain on Sale of Long-Term Investments $2,245

This entry reflects the cost of the 3,500 shares sold ($99,605, which is half of $200,450) and the proceeds of the sale ($102,550 minus $250 brokerage fee). The gain on sale is calculated as follows:

Proceeds of sale ($102,550 - $250 brokerage fee) = $102,300
Less cost of 3,500 shares ($99,605) = $2,695
Less brokerage fees ($400 + $250) = $650
Gain on sale = $2,245

On February 15, Jewel Company Buys 7,000 Shares of Marcelo