Ashcroft Financial paid $590,000 for a 30% investment in the common stock of Sonic, Inc. For the

Question:

Ashcroft Financial paid $590,000 for a 30% investment in the of Sonic, Inc. For the first year, Sonic reported net income of $200,000 and at year-end declared and paid cash dividends of $125,000. On the balance-sheet date, the market value of Ashcroft’s investment in Sonic stock was $390,000.

Requirements
1. Which method is appropriate for Ashcroft Financial to use in accounting for its investment in Sonic? Why?
2. Show everything that Ashcroft would report for the investment and any investment revenue in its year-end financial statements.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...