Assume the same facts as in QS15-8 except that the stock acquired represents 40% of ORD Corp.’ s outstanding stock. Also assume that ORD Corp. paid a $ 100,000 dividend on November 1, 2013, and reported a net income of $ 700,000 for 2013. Prepare the entries to record
(a) The receipt of the dividend
(b) The December 31, 2013, year- end adjustment required for the investment account.
In QS15-8, On May 20, 2013, Montero Co. paid $ 1,000,000 to acquire 25,000 common shares (10%) of ORD Corp. as a long-term investment. On August 5, 2014, Montero sold one-half of these shares for $ 625,000. What valuation method should be used to account for this stock investment? Prepare entries to record both the acquisition and the sale of these shares.