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.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 fair value of the remaining shares is $29.50 per share.The amount that Jewel Company should report on its year-end December 31 income statement related to the investment in Marcelo Corp.is:

Question

Quizplus · Accepted Answer

The correct answer is A because the amount that Jewel Company should report on its year-end December 31 income statement related to the investment in Marcelo Corp. is $10,295. This is calculated as follows:Gain on sale of stock = (Selling price per share - Purchase price per share) x Number of shares sold= ($29.30 - $28.53) x 3,500 shares= $0.77 x 3,500 shares= $2,695Dividend income = Dividend per share x Number of shares held= $1.15 x 7,000 shares= $8,050Unrealized gain on remaining shares = (Fair value per share - Purchase price per share) x Number of shares held= ($29.50 - $28.53) x 3,500 shares= $0.97 x 3,500 shares= $3,395Total income = Gain on sale of stock + Dividend income + Unrealized gain on remaining shares= $2,695 + $8,050 + $3,395= $14,140Less: Brokerage fees= $400 + $250= $650Net income = $14,140 - $650= $13,490

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