Company X purchased 1,000 shares of Company Y for $20.00/share on November 6, 2004. On December 31, 2004, Company Y's fiscal year end, the market value of the Company Y shares was $12.00/share. On February 20, 2005, Company Y paid a cash dividend of $1.50/share to all shareholders. On April 17, 2005 Company X sold the entire stock investment for $17.00/share.

(a)Provide the Company X's journal entry for December 31, 2004 related to the investment.

Nothing was sold here! Why does there need to be a journal entry???


(b)Provide the February 20, 2005 journal entry related to the investment.

So Company X receives dividends since it is a shareholder. So does this lead to an increase in retained earnings (debit) and increase in cash (credit)?

(c)Provide the journal entry for April 17, 2005 related to the investment.

So obviously there is a loss on the investment $3.00/share. Do I show it like this?

Common stock Dr 20000
Cash Cr 17000
Loss Cr 3000

(d)What income (or loss) did Company X show in fiscal 2004? What income (or loss) did it show in fiscal 2005?

My question here is since the stock was just bought in 2004 and was not sold in that fiscal year, is there still a loss even though the price of the stock went down?