Question
In: Accounting
Selk Steel Co., which began operations in Year 1, had the following transactions and events in...
Selk Steel Co., which began operations in Year 1, had the following
transactions and events in its long-term investments.
Year 1
| Jan. | 5 | Selk purchased 60,000 shares (20% of total) of Kildaire's common stock for $1,320,000. | ||
| Oct. | 23 | Kildaire declared and paid a cash dividend of $2.20 per share. | ||
| Dec. | 31 | Kildaire’s net income for the year is $1,164,000 and the fair value of its stock at December 31 is $30 per share. |
Year 2
| Oct. | 15 | Kildaire declared and paid a cash dividend of $3.10 per share. | ||
| Dec. | 31 | Kildaire’s net income for the year is $1,195,000 and the fair value of its stock at December 31 is $32 per share. |
Year 3
| Jan. | 2 | Selk sold 2% (equal to 1,200 shares) of its investment in Kildaire for $66,500 cash. |
Required:
1. Assume that Selk has a significant influence
over Kildaire with its 20% share of stock. Prepare the following
journal entries to record these transactions and events for
Selk:
Oct 15: Kildaire declared and paid a cash dividend of $3.10 per share.
Jan 02: Selk sold 2% (equal to 1,200 shares) of its investment in Kildaire for $66,500 cash.
2. Prepare the following journal entries for these transactions:
Dec 31: Kildaire's net income for the year is $1,164,000, and
the fair value of its stock at December 31 is $30 per share.
Dec 31: Kildaire's net income for the year is $1,195,000, and the
fair value of its stock at December 31 is $32 per share.
Jan 02: Selk sold 2%(equal to 1,200 shares) of its investment in Kildaire for $66,500 cash.
Solutions
Expert Solution
| Selk has a significant influence over Kildaire | |||
| Jan-05 | Investment in Kildaire | $ 1,320,000 | |
| Cash | $ 1,320,000 | ||
| (to record purchase) | |||
| Oct-23 | Cash | $ 132,000 | |
| Investment in Kildaire (60000*2.2) | $ 132,000 | ||
| (to record receipt of dividend) | |||
| Dec-31 | Investment in Kildaire | $ 232,800 | |
| Income in Kildaire | $ 232,800 | ||
| 1164000*20% | |||
| Oct-15 | Cash | $ 186,000 | |
| Investment in Kildaire (60000*3.1) | $ 186,000 | ||
| (to record receipt of dividend) | |||
| Dec-31 | Investment in Kildaire | $ 239,000 | |
| Income in Kildaire | $ 239,000 | ||
| 1195000*20% | |||
| Jan-02 | Cash | $ 66,500 | |
| Gain on sale of investments | $ 37,024 | ||
| Investment in Kildaire | $ 29,476 | ||
|
(1,320,000-132,000+232800-186000+239,000)*2% = $29,476 |
if any doubt please mention in comment
ekkarill92 answered 1 year agoRelated Solutions
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Jan.
5
Selk purchased 80,000 shares (30%
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Selk Steel Co., which began operations on January 4, 2017, had the following subsequent transactions and...
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5
Selk purchased 80,000 shares (30%
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Kildaire declared and paid a cash
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