On March 31, 2018, Chow Brothers, Inc., bought 7% of KT Manufacturing\'s capital

Question

On March 31, 2018, Chow Brothers, Inc., bought 7% of KT Manufacturing's capital stock for $52.7 million. KT's net income for the yea ended December 31, 2018, was $80.9 million. The fair value of the shares held by Chow was $36.8 million at December 31, 2018. KT did not declare or pay a dividend during 2018 Required 1. Prepare all appropriate journal entries related to the investment during 2018 2. Assume that Chow sold the stock on January 20, 2019 for $30.9 million. Prepare the journal entries to record the sale. Complete this question by entering your answers in the tabs below Required 1 Required 2 Prepare all appropriate journal entries related to the investment during 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 1 decimal place (L.e., 5,500,000 should be entered as 5.5)). View transaction list Journal entry worksheet Record the entry for KT's net income Note: Enter debits before credits. vent General Journal

Explanation / Answer

Event Account Titles and Explaination Debit Credit ($' millions) ($' millions) 1 Investment - capital stock 52.7 Cash 52.7 (Being investment recorded) 2 No entry 3 Unrealized holding gain and loss (52.7 - 36.8) 15.9 Fair value adjustment 15.9 (Being fair value adjustment recorded) Date Account Titles and Explaination Debit Credit ($' millions) ($' millions) 1 Unrealized holding gain and loss (52.7 - 30.9 - 15.9) 5.9 Fair value adjustment 5.9 (Being fair value adjustment recorded) 2 Cash 30.9 Realized holding gain and loss (52.7 - 30.9) 21.8 Investment - capital stock 52.7 (Being sale of investment recorded)

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