Forte Inc. produces and sells theater set designs and costumes. The company bega
ID: 2471575 • Letter: F
Question
Forte Inc. produces and sells theater set designs and costumes. The company began operations on January 1, 2016. The following transactions relate to securities acquired by Forte Inc., which has a fiscal year ending on December 31:
2016
2017
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.
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.
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.
Journalize the entries to record these transactions. Be sure to enter the year as part of the date for the first entry on each page. Refer to the information given and the Chart of Accounts provided for the exact wording of the answer choices for text entries.
Prepare the investment-related asset and stockholders’ equity balance sheet presentation for Forte Inc. on December 31, 2017, assuming the Retained Earnings balance on December 31, 2017, is $389,000. Refer to the Chart of Accounts and Amount Descriptions provided for the exact wording of the answer choices for text entries. “Less” or “Plus” will automatically appear if it is required. For those boxes in which you must enter subtracted or negative numbers use a minus sign.
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. Sep. 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 $16 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.Explanation / Answer
Forte Inc. Journal Entries Date Account Title Dr $ Cr $ Jan 22. 2016. Investment in Available for Sale Security-Sankal Inc 396,000 Cash 396,000 ( purchase of 22000 share of Sankal) Mar 8. 2016. Dividend Income 4,840 Cash 4,840 ( dividend receipt -Sankal shares @$0.22) Sep 8. 2016. Dividend Income 5,500 Cash 5,500 ( dividend receipt -Sankal shares @$0.25) Oct 17. 2016. Investment in Available for Sale Security-Sankal Inc 54,000 Cash 47,925 Loss on Sale of Investment 6,075 ( sale of 3000 Sankal shares @$16 less 75 brokerage) Dec31. 2016. Valuation Allowance -Available for Sale Security 133,000 Unrealized Holding Gain/(loss) in Available for Sale Security -OCI 133,000 (Fair value adjustement $25 for Sankal shares) Jan 10.2017. Investment in Imboden Inc. 720,000 Cash 720,000 ( 32% Equity Investment in Imboden) Mar 10.2017. Dividend Income 5,700 Cash 5,700 ( dividend receipt -Sankal shares @$0.30) Sep 12.2017. Dividend Income 5,700 Cash 5,700 ( dividend receipt -Sankal shares @$0.30) Dec31.2017. Valuation Allowance -Available for Sale Security 57,000 Unrealized Holding Gain/(loss) in Available for Sale Security -OCI 57,000 (Fair value adjustement $22 for Sankal shares) Dec31.2017. Investment in Imboden Inc. 144,000 Equity income from Imboden Inc 144,000 (recording 32% share of Imboden Income) Cash 57,600 Investment in Imboden Inc. 57,600 ( dividend receipt) Forte Inc. Balance Sheet (Partial) As on Dec 31.2017. Details Amt $ Assets Investment in Available for Sale Security-Sankal Inc 342,000 Valuation Allowance -Available for Sale Security 76,000 FV of Investment in Available for Sale Security 418,000 Investment in Imboden Inc. 806,400 Total Investments 1,224,400 Shareholders' Equity (partial) Retained Earning 389,000 Accumulated OCI OCI -Available for sale security 76,000 Total Stockholders' Equity 465,000
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