Exercise 12-15 (Algo) Equity investments; fair value through net income [LO12-5]

On March 31, 2021, Chow Brothers, Inc., bought 6% of KT Manufacturings capital stock for $53.9 million. KTs net income for the year ended December 31, 2021, was $81.3 million. The fair value of the shares held by Chow was $37.6 million at December 31, 2021. KT did not declare or pay a dividend during 2021. Required: 1. Prepare all appropriate journal entries related to the investment during 2021. 2. Assume that Chow sold the stock on January 20, 2022, for $31.3 million. Prepare the journal entries to record the sale.

Part 1:

• Record the purchase of KT Manufacturings capital stock for $53.9 million.
• Record the entry for KT's net income
• Record the entry for KT's net income.

Part 2:

• Record the entry to adjust the fair value.
• Record the sale of stock on January 20, 2022 for $31.3 million.

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