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.

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

1. Compute the cost 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 Kildaire.

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. Cost per share of Selk’s investment in Kildaire common stock as reflected in the investment account on January 1, 2017 = $1560000/ 60000 shares = $26

2.

Dividend income in 2015 ($3.20 x 60000) $192000 Dividend income in 2016 ($2.60 x 60000) 156000 Profit on sale of investment in 2017 ($1894000 - $1560000) 334000 Net increase in Selk’s equity from January 5, 2015, through January 2, 2017 resulting from its investment in Kildaire $682000

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