Question

Forte Inc. produces and sells theater set designs and costumes. The company began operations on January 1, Year 1. The following transactions relate to securities acquired by Forte Inc., which has a fiscal year ending on December 31:

Record these transactions on page 10:

Year 1
Jan.	22	Purchased 19,600 shares of Sankal Inc. as an available-for-sale security at $19 per share, including the brokerage commission.
Mar.	8	Received a cash dividend of $0.21 per share on Sankal Inc. stock.
Sep.	8	A cash dividend of $0.24 per share was received on the Sankal stock.
Oct.	17	Sold 1,600 shares of Sankal Inc. stock at $15 per share less a brokerage commission of $80.
Dec.	31	Sankal Inc. is classified as an available-for-sale investment and is adjusted to a fair value of $25 per share. Use the valuation allowance for available-for-sale investments account in making the adjustment.

Record these transactions on page 11:

Year 2
Jan.	10	Purchased an influential interest in Imboden Inc. for $886,950 by purchasing 121,500 shares directly from the estate of the founder of Imboden Inc. There are 450,000 shares of Imboden Inc. stock outstanding.
Mar.	10	Received a cash dividend of $0.29 per share on Sankal Inc. stock.
Sep.	12	Received a cash dividend of $0.24 per share plus an extra dividend of $0.06 per share on Sankal Inc. stock.
Dec.	31	Received $53,800 of cash dividends on Imboden Inc. stock. Imboden Inc. reported net income of $407,200 in Year 2. Forte Inc. uses the equity method of accounting for its investment in Imboden Inc.
Dec.	31	Sankal Inc. is classified as an available-for-sale investment and is adjusted to a fair value of $23 per share. Use the valuation allowance for available-for-sale investments account in making the adjustment for the decrease in fair value from $25 to $23 per share.

	Required:
1.	Journalize the entries to record these transactions. Refer to the information given and the Chart of Accounts provided for the exact wording of the answer choices for text entries.
2.	Prepare the investment-related asset and stockholders’ equity balance sheet presentation for Forte Inc. on December 31, Year 2, assuming the Retained Earnings balance on December 31, Year 2, is $415,000. Refer to the Chart of Accounts and Amount Descriptions provided for the exact wording of the answer choices for text entries. “Less” or “Plus” will automatically appear if it is required. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Answer 1

Date	General Journal	Debit	Credit
22-Jan	Investments-Sankal Inc	372400
	Cash		372400
	19600*19
	Cash	4116
	Dividend Revenue		4116
	19600*0.21
	Cash	4704
	Dividend Revenue		4704
	19600*0.24
	Cash	23920
	Loss On sale of Investments	6480
	Investments-Sankal Inc		30400
	1600*15-80
	1600*19
	Valuation allowance for available for sale investments	108000
	Unrealized gain (loss) available for sale investments		108000
	(19600-1600)*(25-19)
	Investment in Imboden Inc.	886,950
	Cash		886,950
	Cash	5220
	Dividend Revenue		5220
	(19600-1600)*0.29
	Cash	5400
	Dividend Revenue		5400
	(19600-1600)*(0.24+0.06)
	Cash	53800
	Investment in imboden inc		53800
	Investment in imboden inc	109,944
	Income of imboden inc		109,944
	407,200 *(121500/450,000)
	Unrealized gain on available for sale investments sale Investment	36000
	Valuation allowance for allowance for sale investment		36000
	(19600-1600)(23-25)

2

Forte Inc. Balance Sheet Selected items (December 31 Year 2)
Current Assets
Available for sale investments at cost (19600-1600)*19	342000
Add: Valuation allowance for available for sale investments	36000
Available for sale investments at fair value		378000
Investments
Investments in Imboden Inc		943,094
886950+109944-53800
Stockholder's equity
Retained earnings		415,000
Unrealized gain (loss) on available-for-sale investments		36000