Kappa Company acquired 20% of the voting stock of Omega Company for $40 million cash. In year

Question:

Kappa Company acquired 20% of the voting stock of Omega Company for $40 million cash. In year 1, Omega had a net income of $20 million and paid cash dividends of $10 million. At the end of the year, the total market value of Omega Company was $240 million. Prepare a tabulation that compares the equity method and the market-value method of accounting for Kappa’s investment in Omega. Show the effects on the balance sheet equation under each method. What is the year-end balance in the Investment in Omega account under the equity method? Under the market-value method?

What difference in accounting would there be if the investment were a trading security instead of an available-for-sale security?

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...