Reference no: EM131975411
Problem
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
Oct. 15 Kildaire declared and paid a cash dividend of $2.60 per share.
Dec. 31 Kildaire'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 2
Assume that although Selk owns 20% of Kildaire's outstanding stock, circumstances indicate that it does not have a significant influence over the investee and that it is classified 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. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
2017
1.Selk purchased 60,000 shares (20% of total) of Kildaire's common stock for $1,560,000.
2.Kildaire declared and paid a cash dividend of $3.20 per share.
3.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.Kildaire declared and paid a cash dividend of $2.60 per share.
2.Kildaire'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
1.Selk sold all of its investment in Kildaire for $1,894,000 cash.
2.Remove any balance related to the fair value adjustment.
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