Question

Recording and Reporting an Equity Method Security Felicia Company acquired some of the 60,000 outstanding common shares of Nueces Corporation during 2014, as a non- current investment. The fiscal year for both companies ends December 31. The following transactions occurred during 2014: Jan. 10 Purchased 21,000 of Nueces common shares at $ 12 per share.
Dec. 31 a. Received the 2014 financial statements of Nueces Corporation that reported net earnings of $ 90,000.
b. Nueces Corporation declared and paid a cash dividend of $ 0.60 per share.
c. Determined the market price of Nueces stock to be $ 11 per share. The decrease in price is not considered an impairment in the value of the investment.
Required:
1. What accounting method should the company use? Why?
2. Prepare the journal entries for each of these transactions. If no entry is required, explain why.
3. Show how the non- current investment and the related revenue should be reported on the 2014 financial statements (statement of financial position and statement of earnings) of the company.


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  • CreatedAugust 04, 2015
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