Videos
Problem 15−4A
Accounting for long-term investments in securities; with and without signi?cant in?uence
P3 P4
Selk Steel Co., which began operations on January 4, 2017, had the following subsequent transactions and events in its long-term investments
2017
Jan. 5 Selk purchased 60,000 shares (20% of total) of Kildaire’s common stock for $1,560,000.
Oct. 23 Kildaire declared and paid a cash dividend of $3.20 per share.
Dec. 31 Kildaire’s net income for 2017 is $1,164,000, and the fair value of its stock at December 31 is $30.00 per share.
2018
1. Oct. 15 Kildaire declared and paid a cash dividend of $2.60 per share.
2. Dec. 31 Ki1daire’s net income for 2018 is $1,476,000, and the fair value of its stock at December 31 is $32.00 per share.
2019
Jan. 2 Selk sold all of its investment in Kildaire for $1,894,000 cash
Part 1
Assume that Selk has a signi?cant in?uence over Kildaire with its 20% share of stock.
Required
1. Prepare
2. Compute the carrying (book) value per share of Selk’s investment in Kildaire common stock as re?ected in the investment account on January 1, 2019.
3. Compute the net increase or decrease in Selk’s equity from January 5, 2017, through January 2, 2019, resulting from its investment in Kildaire.
Check (2) Carrying value per share $29
Part 2
Assume that although Selk owns 20% of Kildaire’s outstanding stock, circumstances indicate that it does not have a signi?cant in?uence over the investee and that it is classi?ed as an available-for-sale security investment.
Required
1. Prepare journal entries to record the preceding transactions and events for Selk. Also prepare an entry dated January 2, 2019, to remove any balance related to the fair value adjustment.
2. Compute the cost per share of Selk’s investment in Kildaire common stock as re?ected in the investment account on January 1, 2019.
3. Compute the net increase or decrease in Selk’s equity from January 5, 2017, through January 2, 2019, resulting from its investment in Kildaire.
(1) 1/2/2019 Dr. Unrealized Gain-Equity $360,000
(3) Net increase $682,000
Want to see the full answer?
Check out a sample textbook solution
Chapter 15 Solutions
Fundamental Accounting Principles
- Summit Beverages purchased a delivery truck for $90,000. The company estimates a 5-year useful life with a residual value of $10,000. Using the double-declining balance depreciation method, what is the depreciation expense for the first year?arrow_forwardNorthern Lights Inc. had net credit sales of $600,000 and accounts receivable of $75,000 at the beginning of the year and $85,000 at the end of the year. What is the accounts receivable turnover ratio for the company?arrow_forwardcorrect answer pleasearrow_forward
- Provide solutionarrow_forwardEvergreen Systems started the year with $980,000 in total assets and $450,000 in total liabilities. During the year, the company generated $160,000 in net income, paid $35,000 in dividends, and issued common stock worth $55,000. What is the company's total equity at the end of the year?arrow_forwardAnswer please but not use aiarrow_forward
Financial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage Learning
Financial AccountingAccountingISBN:9781305088436Author:Carl Warren, Jim Reeve, Jonathan DuchacPublisher:Cengage Learning
Financial & Managerial AccountingAccountingISBN:9781285866307Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning