# Question: Selk Steel Co which began operations on January 4 2015

Selk Steel Co., which began operations on January 4, 2015, had the following subsequent transactions and events in its long-term investments.
2015
Jan. 5 Selk purchased 60,000 shares (20% of total) of Kildaire’s common stock for \$1,560,000.
Oct. 23 Kildaire declared and paid a cash dividend of \$3.20 per share.
Dec. 31 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.
2016
Oct. 15 Kildaire declared and paid a cash dividend of \$2.60 per share.
Dec. 31 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.
2017
Jan. 2 Selk sold all of its investment in Kildaire for \$1,894,000 cash.
Part 1
Assume that Selk has a significant influence over Kildaire with its 20% share of stock.
Required
1. Prepare journal entries to record these transactions and events for Selk.
2. 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.
3. Compute the net increase or decrease in Selk’s equity from January 5, 2015, through January 2, 2017, resulting from its investment in Kildaire.
Part 2
Assume that although Selk owns 20% of Kildaire’s outstanding stock, circumstances indicate that it does not have a significant influence over the investee and that it is classified as an available-for-sale security investment.
Required
1. Prepare journal entries to record the preceding transactions and events for Selk. Also prepare an entry dated January 2, 2017, to remove any balance related to the fair value adjustment.
2. Compute the cost per share of Selk’s investment in Kildaire common stock as reflected in the investment account on January 1, 2017.
3. Compute the net increase or decrease in Selk’s equity from January 5, 2015, through January 2, 2017, resulting from its investment in Kildaire.

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