Selk Steel Company, which began operations in Year 1, had the following transactions and events in its long-term investments.Year 1January 5Selk purchased 40,000 shares (20% of total) of Kildaire's common stock for $1,400,000.October 23Kildaire declared and paid a cash dividend of $3.80 per share.December 31Kildaire’s net income for the year is $1,170,000, and the fair value of its stock at December 31 is $42 per share.Year 2October 15Kildaire declared and paid a cash dividend of $2.70 per share.December 31Kildaire’s net income for the year is $1,181,000, and the fair value of its stock at December 31 is $46 per share.Year 3January 2Selk sold 2% (equal to 800 shares) of its investment in Kildaire for $67,400 cash.Assume that although Selk owns 20% of Kildaire’s outstanding stock, circumstances indicate that it does not have a significant influence over the investee.Required:Prepare journal entries to record the preceding transactions and events for Selk. Year 1Year 2Year 3Prepare journal entries to record the preceding transactions and events for Selk.View transaction listJournal entry worksheet1>Selk purchased 40,000 shares (20% of total) of Kildaire's common stock for$1,400,000.Note: Enter debits before credits.DateGeneral JournalDebitCreditJanuary 05

Under the equity method of accounting, investment balance is decreased by dividends received from…

Answered: elk Steel Company, which began…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Selk Steel Company, which began operations in Year 1, had the following transactions and events in its long-term investments.

Year 1

January 5	Selk purchased 40,000 shares (20% of total) of Kildaire's common stock for $1,400,000.
October 23	Kildaire declared and paid a cash dividend of $3.80 per share.
December 31	Kildaire’s net income for the year is $1,170,000, and the fair value of its stock at December 31 is $42 per share.

Year 2

October 15	Kildaire declared and paid a cash dividend of $2.70 per share.
December 31	Kildaire’s net income for the year is $1,181,000, and the fair value of its stock at December 31 is $46 per share.

Year 3

January 2	Selk sold 2% (equal to 800 shares) of its investment in Kildaire for $67,400 cash.

Assume that although Selk owns 20% of Kildaire’s outstanding stock, circumstances indicate that it does not have a significant influence over the investee.

Required:
Prepare journal entries to record the preceding transactions and events for Selk.

Year 1
Year 2
Year 3
Prepare journal entries to record the preceding transactions and events for Selk.
View transaction list
Journal entry worksheet
1
>
Selk purchased 40,000 shares (20% of total) of Kildaire's common stock for
$1,400,000.
Note: Enter debits before credits.
Date
General Journal
Debit
Credit
January 05

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