FFB used cash from the bond sale Possibility 1 Purchase tre

FFB used cash from the bond sale Possibility 1 - Purchase treasury stock on June 2, 2014 in the amount of $1,000. And, also purchase on that date a 20% interest in a additional protein) for $1,000. Possibility 2-Purchase a 40% interest in the flour company above do one of the following. to company that manufactures flour mixed with ground crickets (for for $2,000. In both possibility 1 and 2, the investment is accounted for using the equity method. The earnings of the new flour company are $100 for the year ending May 31, 2015. No dividends were paid by this company

Solution

Selecting possibility 1, the journal entry would be,

Date- June 2, 2014

Treasury stock. Dr. $2000

Investment cost Dr $1000

To cash $3000

Explanation- To purchase treasury stock and 20% investment in another company, cash is used, therefore, treasury account and investment account are debited and cash account is credited.

Simply, Debit is what comes in and Credit is what goes out.