Glaser Services acquired 30% of the outstanding common stock of Nickels Company on January 1, 2010, by paying $800,000 for the 45,000 shares. Nickels declared and paid $0.30 per share cash dividends on March 15, June 15, September 15, and December 15, 2010. Nickels reported net income of $320,000 for the year. At December 31, 2010, the market price of Nickels common stock was $24 per share.
Instructions
(a) Prepare the journal entries for Glaser Services for 2010 assuming Glaser cannot exercise significant influence over Nickels. (Use the cost method and assume that Nickels common stock should be classified as a trading security.)
(b) Prepare the journal entries for Glaser Services for 2010, assuming Glaser can exercise significant influence over Nickels. Use the equity method.
(c) Indicate the balance sheet and income statement account balances at December 31, 2010, under each method of accounting.

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September 13, 2011

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