Question

Required information The following information applies to the questions displayed below 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 50,000 shares (25% of t tal) of Kildaire's common stock for $1,000,000. Oct. 23 Kildaire declared and paid a cash dividend of $3.70 per share. Dec. 31 Kildaire's net income for 2017 is $1,214,000, and the fair value of its stock at December 31 is $30.50 per share. 2018 Oct. 15 Kildaire declared and paid a cash dividend of $2.70 per share. Dec. 31 Kildaire's net income for 2018 is $1,526,000, and the fair value of its stock at December 31 is $32.50 per share. 2019 Jan. 2 Selk sold all of its investment in Kildaire for $1,498,000 cash. Part 1 Assume that Selk has a significant influence over Kildare with its 25% share of stock. Required . Prepare journal entries to record these transactions and events for Selk. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Complete this question by entering your answers in the tabs below 2017 2018 2019 Required information The following information applies to the questions displayed below.] 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 50,000 shares (25% of total) of Kildaire's common stock for 두1,000,000 Oct. 23 Kildaire declared and paid a cash dividend of $3.70 per share Dec. 31 Kildaire's net income for 2017 is 두1,214,000, and the fair value of its stock at December 31 is $30.50 per share 2018 Oct. 15 Kildaire declared and paid a cash dividend of $2.70 per share Dec. 31 Kildaire's net income for 2018 is ,526,000, and the fair value of its 3tock at December 31 i3 $32.50 per share 2019 Jan. 2 Selk sold all of its investment in Kildaire for $1,498,000 cash. Part 2 Assume that although Selk owns 25% of Kildare'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. (lf no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Complete this question by entering your answers in the tabs below 2017 2018 2019 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.

Answer 1

1	With significant influence over Kildaire
		Journal Entries
	Date	Account Title	Debit-$	Credit-$
	5-Jan	Long Term investment	1000000
		cash		1000000
		to record purchase of 25% shares of Kildaire
	23-Oct	cash-50000*$3.7	185000
		Long Term investment		185000
		to record of dividends received
	31-Dec	Long Term investment-1214000*.25	303500
		Earnings from long term investment		303500
		to record the net income
		For 2018
	15-Oct-18	Cash-50000*$2.7	135000
		Long Term Investments		135000
		to record of dividends received
	31-Dec-18	Long Term Investments-1526000*.25	381500
		Earnings from long term investment		381500
		to record the net income
		For 2019
	2-Jan-19	Cash	1498000
		Gain on Long term investment		133000
		Long Term Investment		1365000
		1000000+303500+381500-185000-135000
2	Without significant influence over Kildaire
	5-Jan	Long Term investment	1000000
		cash		1000000
		to record purchase of 25% shares of Kildaire
	23-Oct	cash-50000*$3.7	185000
		Dividend Revenue		185000
		to record of dividends received
	31-Dec	Fair Value Adjustment=(50000*30.5-1000000)	525000
		Unrealized gain-Equity		525000
		to record of adjusted M.V of the share
		For Yr 2018
	15-Oct-18	Cash	135000
		Dividend Revenue		135000
		to record of dividends received
	31-Dec	Fair Value Adjustment=(50000*32.5-1000000)	625000
		Unrealized gain-Equity		625000
		to record of adjusted M.V of the share
		For 2019
	2-Jan-19	Cash	1498000
		Gain on Long term investment		498000
		Long Term Investment		1000000
	2-Jan-19	Unrealized gain-Equity	1150000
		Fair Value adjustment		1150000
		to record of w/o off fair value adjustment