Selk Steel Co., which began operations on January 4, 2015, had the following sub

Question

Selk Steel Co., which began operations on January 4, 2015, had the following subsequent transactions and events in its long-term investments.

Kildaire's net income for 2015 is $1,164,000, and the fair value of its stock at December 31 is $30.00 per share.

Kildaire's net income for 2016 is $1,476,000, and the fair value of its stock at December 31 is $32.00 per share.

Jan

Selk sold all of its investment in Kildaire for $1,894,000 cash.

1. Compute the carrying (book) value per share of Selk’s investment in Kildaire common stock as reflected in the investment account on January 1, 2017.

2. Compute the net increase or decrease in Selk’s equity from January 5, 2015, through January 2, 2017, resulting from its investment in Kildair

Selk Steel Co., which began operations on January 4, 2015, had the following subsequent transactions and events in its long-term investments.

Explanation / Answer

1). Journal Entries :-

Working Note :-

Carring Value of the investment :

2). Net Increase or decrease in equity as follows :-

Date Particulars Debit ($) Credit ($) Jan 5, 2015 Investment - K 1560000 To Cash 1560000 Oct 23, 2015 Cash (60000*$3.2) 192000 To Investment - K 192000 Dec 31, 2015 Investment - K ($1164000 * 20%) 232800 To Investment - K 232800 Oct 15, 2016 Cash (60000 * $2.60) 156000 To Investment - K 156000 Dec 31, 2016 Investment - K (1164000*20%) 295200 To Earnings from Investment 295200 Jan 2, 2017 Cash 1894000 To Gain on sale of investment 154000 To Investment - K (Working Note) 1740000

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