On March 31, 2018, Chow Brothers, Inc., bought 10% of KT Manufacturing’s capital stock for $50 million. KT’snet income for the year ended December 31, 2018, was $80 million. The fair value of the shares held by Chow was$35 million at December 31, 2018. KT did not declare or pay a dividend during 2018.Required:1. Prepare all appropriate journal entries related to the investment during 2018.2. Assume that Chow sold the stock on January 20, 2019 for $30 million. Prepare the journal entry Sanbornwould use to record the sale.
On March 31, 2018, Chow Brothers, Inc., bought 10% of KT Manufacturing’s capital stock for $50 million. KT’snet income for the year ended December 31, 2018, was $80 million. The fair value of the shares held by Chow was$35 million at December 31, 2018. KT did not declare or pay a dividend during 2018.Required:1. Prepare all appropriate journal entries related to the investment during 2018.2. Assume that Chow sold the stock on January 20, 2019 for $30 million. Prepare the journal entry Sanbornwould use to record the sale.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
On March 31, 2018, Chow Brothers, Inc., bought 10% of KT Manufacturing’s capital stock for $50 million. KT’s
net income for the year ended December 31, 2018, was $80 million. The fair value of the shares held by Chow was
$35 million at December 31, 2018. KT did not declare or pay a dividend during 2018.
Required:
1. Prepare all appropriate journal entries related to the investment during 2018.
2. Assume that Chow sold the stock on January 20, 2019 for $30 million. Prepare the
would use to record the sale.
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