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Prepare the investment-related asset balance sheet

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Reference no: EM132315890

Question :

Stock investment transactions, equity method and available-for-sale OBJ. 3, 4 securities

Forte Inc. produces and sells theater set designs and costumes. The company began op¬erations on January 1, 2016. The following transactions relate to securities acquired by Forte Inc., which has a fiscal year ending on December 31:
2016

Jan. 22. Purchased 22,000 shares of Sankal Inc. as an available-for-sale security at $18 per share, including the brokerage commission.

Mar. 8. Received a cash dividend of $0.22 per share on Sankal Inc. stock. Sept. 8. A cash dividend of $0.25 per share was received on the Sankal stock.

Oct. 17. Sold 3,000 shares of Sankal Inc. stock at 816 per share, less a brokerage commission of $75.

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.
2017

Jan. 10. Purchased an influential interest in Imboden Inc. for $720,000 by purchasing 96,000 shares directly from the estate of the founder of Imboden Inc. There are 300,000 shares of Imboden Inc. stock outstanding.

Mar. 10. Received a cash dividend of $0.30 per share on Sankal Inc. stock.

Sept.12. Received a cash dividend of $0.25 per share plus an extra dividend of $0.05 per share on Sankal Inc. stock.

Dec. 31. Received $57,600 of cash dividends on Imboden Inc. stock. Imboden Inc. reported net income of $450,000 in 2017. Forte Inc. uses the equity method of accounting for its investment in Imboden Inc.

31. Sankal Inc. is classified as an available-for-sale investment and is adjusted to a fair value of $22 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 $22 per share.

Instructions

1. Journalize the entries to record these transactions.

2. Prepare the investment-related asset and stockholders' equity balance sheet presenta¬tion for Forte Inc. on December 31, 2017, assuming the Retained Earnings balance on December 31, 2017, is $389,000.

Reference no: EM132315890

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