Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. selk steel co., which began operations on january

Selk Steel Co., which began operations on January 4, 2017, had the following subsequent transactions and events...

Free

80.2K

Verified Solution

Question

Accounting

Selk Steel Co., whichbegan operations on January 4, 2017, had the following subsequenttransactions and events in its long-term investments.
   

2017

Jan.5Selk purchased60,000 shares (20% of total) of Kildaire's common stock for$1,560,000.
Oct.23Kildaire declaredand paid a cash dividend of $3.20 per share.
Dec.31Kildaire’s netincome for 2017 is $1,164,000, and the fair value of its stock atDecember 31 is $30.00 per share.


2018

Oct.15Kildaire declaredand paid a cash dividend of $2.60 per share.
Dec.31Kildaire’s netincome for 2018 is $1,476,000, and the fair value of its stock atDecember 31 is $32.00 per share.


2019

Jan.2Selk sold all ofits investment in Kildaire for $1,894,000 cash.

Problem 15-4A Part 2

Part 2
Assume that although Selk owns 20% of Kildaire’s outstanding stock,circumstances indicate that it does not have a significantinfluence over the investee and that it is classified as anavailable-for-sale security investment.

Required:
1. Prepare journal entries to record the precedingtransactions and events for Selk. Also prepare an entry datedJanuary 2, 2019, to remove any balance related to the fair valueadjustment. (If no entry is required for atransaction/event, select "No journal entry required" in the firstaccount field.)

Answer & Explanation Solved by verified expert
4.2 Ratings (643 Votes)

Part 2
Date General Journal Debit Credit
01-05-17 Long term investments-AFS (kildaire) 1560000
   Cash 1560000
23-10-17 Cash 192000
   Dividend Revenue 192000
(60000*$3.20)
31-12-17 Fair value adjustment-AFS 240000
Unrealised gain-equity 240000
($30-$26)*60000 shares
15-10-18 Cash 156000
   Dividend Revenue 156000
(60000*$2.60)
31-12-18 Fair value adjustment-AFS 120000
Unrealised gain-equity 120000
($32-$30)*60000
02-01-19 Cash 1894000
   Gain on sale of investment 334000
   Long term investments-AFS (kildaire) 1560000
02-01-19 Unrealised gain-equity 360000
   Fair value adjustment-AFS 360000

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students