Question

P17-10 (L02) EXCEL (Equity Investments) Castleman Holdings, Inc. had the following equity investment portfolio at January 1, 2017 Evers Company Rogers Company Chance Company 1,000 shares@$15 each 900 shares@ $20 each 500 shares@$9 each $15,000 18,000 4,500 Equity investments@cost Fair value adjustment 37,500 (7,500) Equity investments@ fair value $30,000 During 2017, the following transactions took place 1. On March 1, Rogers Company paid a $2 per share dividend. 2. On April 30, Castleman Holdings, Inc. sold 300 shares of Chance Company for $11 per share. 3. On May 15, Castleman Holdings, Inc. purchased 100 more shares of Evers Company stock at $16 per share 4. At December 31, 2017, the stocks had the following price per share values: Evers $17, Rogers $19, and Chance $8. During 2018, the following transactions took place. 5. On February 1, Castleman Holdings, Inc. sold the remainirng Chance shares for $8 per share. 6. On March 1, Rogers Company paid a $2 per share dividend. 7. On December 21, Evers Company declared a cash dividend of $3 per share to be paid in the next month. 8. At December 31, 2018, the stocks had the following price per share values: Evers $19 and Rogers $21 Instructions (a) Prepare journal entries for each of the above transactions. (b) Prepare a partial balance sheet showing the investment-related amounts to be reported at December 31, 2017 and 2018.

Answer 1

a. In the books of Castleman Holdings:

Transaction / Event	Date	Account Titles	Debit	Credit
	2017		$	$
1.	March 1	Cash	1,800
		Dividend Revenue		1,800
2.	April 30	Cash	3,300
		Gain on Sale of Investments		600
		Equity Investments		2,700
3.		Equity Investments	1,600
		Cash		1,600
4.	December 31	Fair Value Adjustment ( Available for Sale )*	8,500
		Unrealized Gain or Loss : Equity		8,500
	2018
5.	February 1	Cash	1,600
		Loss on Sale of Investments	200
		Equity Investments		1,800
6.	March 1	Cash	1,800
		Dividend Revenue		1,800
7.	December 21	Dividend Receivable	3,300
		Dividend Revenue		3,300
8.	December 31	Fair Value Adjustment ( Available for Sale ) **	4,200
		Unrealized Gain or Loss: Equity		4,200

* December 31, 2017

Investment	Cost	Fair Value	Unrealized Gain ( Loss)
Evers Company	16,600	18,700	2,100
Rogers Company	18,000	17,100	(900)
Chance Company	1,800	1,600	(200)
Totals	$36,400	$ 37,400	$ 1,000
Beginning Fair Value Adjustment Balance: Cr.			7,500
Fair Value Adjustment: Dr.			8,500

** December 31, 2018:

Investment	Cost	Fair Value	Unrealized Gain or Loss
Evers Company	16,600	20,900	4,300
Rogers Company	18,000	18,900	900
Totals	34,600	39,800	5,200
Beginning Fair Value Adjustment Balance: Dr.			1,000
Fair Value Adjustment : Dr.			4,200

b.

Castleman Holdings Inc. Balance Sheet ( Partial ) December 31
Assets	2017	2018
Current Assets
Dividend Receivable	$ 0	$ 3,300
Investments
Available for Sale Investments, at fair value	37,400	39,800
Fair Value Adjustment
Liabilities and Stockholders' Equity
Stockholders' Equity
Accumulated Other Comprehensive Income	1,000	5,200