I need help finishing this problem! :( Selk Steel Co., which began operations on

Question

I need help finishing this problem! :(

Selk Steel Co., which began operations on January 4, 2015, had the following subsequent transactions and events in its long-term investments.

2015

Kildaire's net income for 2015 is $1,294,000, and the fair value of its stock at December 31 is $33.50 per share.

Kildaire's net income for 2016 is $1,606,000, and the fair value of its stock at December 31 is $35.00 per share

Assume that although Selk owns 25% of Kildaire’s outstanding stock, circumstances indicate that it does not have a significant influence over the investee and that it is classified as an available-for-sale security investment.

  

Prepare journal entries to record the preceding transactions and events for Selk. Also prepare an entry dated January 2, 2017, to remove any balance related to the fair value adjustment. (If no entry is required select No journal entry required in the first entry field)

     

Compute the cost per share of Selk’s investment in Kildaire common stock as reflected in the investment account on January 1, 2017.

     

Compute the net increase or decrease in Selk’s equity from January 5, 2015, through January 2, 2017, resulting from its investment in Kildaire.

     

   

Jan. 5 Selk purchased 50,000 shares (25% of total) of Kildaire's common stock for $1,600,000. Oct. 23 Kildaire declared and paid a cash dividend of $4.50 per share. Dec. 31

Kildaire's net income for 2015 is $1,294,000, and the fair value of its stock at December 31 is $33.50 per share.

Explanation / Answer

ANS;

Answer for question no.1:

Answer for question no:2:

Answer for question no.3:

Net increase in Selk's equity is Balance in the investment account as on 31-12-2016 1,565,000 - Initial investment $1,350,000 =$215,000.

Part II:

Answer for question no.1:

Date Entry Debit Credit 5-Jan-15 Investment a/c                  Dr 1350000 To    Cash a/c Cr $1,350,000.00 (Being 50000 shares of Kildaire purchased) 23-Oct-15 Cash a/c   Dr $200,000.00 To investment a/c Cr $200,000.00 (Being dividend on shares purchased received) 31-Dec-15 Investment a/c Dr $248,800.00 To Investment income a/c Cr $248,800.00 (Being share of income in Kildaire recorded) 15-Oct-16 Cash a/c   Dr $145,000.00 To investment a/c Cr $145,000.00 (Being dividend on shares purchased received) 31-Dec-16 Investment a/c Dr $311,200 To Investment income a/c Cr $311,200.00 (Being share of income in Kildaire recorded) 2-Jan-17 Cash a/c Dr $1,820,000.00 To gain on sale of investment in Kildaire $255,000.00 To investment a/c Cr $1,565,000.00 (Being investment in Kildaire sold)

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.