Conroy Financial paid $510,000 for a 35% investment in the common stock of Timberwolf, Inc. For the

Question:

Conroy Financial paid $510,000 for a 35% investment in the of Timberwolf, Inc. For the first year, Timberwolf reported net income of $210,000 and at year-end declared and paid cash dividends of $135,000. On the balance-sheet date, the fair value of Conroy’s investment in Timberwolf stock was $400,000.

Requirements
1. Which method is appropriate for Conroy Financial to use in accounting for its investment in Timberwolf? Why?
2. Show everything that Conroy 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...