Question: (Equity Investments) Castleman Holdings, Inc. had the following equity investment portfolio at

January 1, 2017.

Evers Company 1,000 shares @ \(15 each \)15,000

Rogers Company 900 shares @ \(20 each 18,000

Chance Company 500 shares @ \)9 each 4,500

Equity investments @ cost 37,500

Fair value adjustment (7,500)

Equity investments @ fair value \(30,000

During 2017, the following transactions took place.

1. On March 1, Rogers Company paid a \)2 per share dividend.

2. On April 30, Castleman Holdings, Inc. sold 300 shares of Chance Company for \(11 per share.

3. On May 15, Castleman Holdings, Inc. purchased 100 more shares of Evers Company stock at \)16 per share.

4. On December 31, 2017, the stocks had the following price per share values: Evers \(17, Rogers \)19, and Chance \(8.

During 2018, the following transactions took place.

5. On February 1, Castleman Holdings, Inc. sold the remaining Chance shares for \)8 per share.

6. On March 1, Rogers Company paid a \(2 per share dividend.

7. On December 21, Evers Company declared a cash dividend of \)3 per share to be paid in the next month.

8. On December 31, 2018, the stocks had the following price per share values: Evers \(19 and Rogers \)21.

Instructions

(a) Prepare journal entries for each of the above transactions.

(b) Prepare a partial balance sheet showing the investment-related amounts to be reported on December 31, 2017, and 2018.

Step by step solution

01

Journal entries related to the transaction of the securities

Date	Particulars	Debit	Credit
2017
March 1	Cash	$1,800
	Dividend Revenue		$1,800
	(Being entry of the dividend received)
April 30	Cash	$3,300
	Gain on sale of investment		$600
	Equity investment		$2,700
	(Being entry of the sale of investment)
May 15	Equity investment	$1,600
	Cash		$1,600
	(Being entry for the purchase of the investment)
December 31	Fair Value Adjustment	$8,500
	Unrealized Holding income		$8,500
	(Being entry for the fair value adjustment0
2018
February 1	Cash	$1,600
	Loss on sale of investment	$200
	Equity Investment		$1,800
	(Being entry for the sale of the investment)
March 1	Cash	$1,800
	Dividend Revenue		$1,800
	(Being entry for the dividend revenue)
December 21	Dividend Receivable	$3,300
	Dividend Revenue		$3,300
	(Being entry for the Dividend receivable)
December 31	Fair Value Adjustment	$4,200
	Unrealized Holding Income		$4,200
	(Being entry for the fair value adjustment)

02

Partial balance sheet of Castleman Holding, Inc.

Partial Balance Sheet
Castleman Holding, Inc.
Particulars	31-12-2017	31-12-2018
Current Assets:
Dividend Receivables		$3,300
Investments:
Available for sale of securities (Fair Value)	$38,100	$37,900
Shareholder’s equity:
Accumulates other comprehensive gains	$8,500	$4,200

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