On January 1, 2019, Stern Corporation purchased 100 shares of common stock issued by Milstein Inc. (representing

Question:

On January 1, 2019, Stern purchased 100 shares of issued by Milstein Inc. (representing 12% of the total shares outstanding) for $6,000 and 500 shares of Heifetz Inc. (representing 25% of the total shares outstanding) for $20,000. Assume that the acquisition cost of each investment equals the book value of the related stockholders' equity on the records of the investee. During 2019, Milstein declared and paid cash dividends to Stern of $500, and Heifetz declared and paid cash dividends to Stern of $1,700. Milstein reported 2019 net income of $12,000, and Heifetz reported 2019 net income of $15,000. On December 31, 2019, the market value of 100 shares of Milstein was $6,450, and the market value of 500 shares of Heifetz was $19,720.
Required:
Answer the following questions for both investments:
Milstein .................. Heifetz
1. Which accounting method is applicable?
2. What amount is recorded in the investment account on the date of acquisition?
3. What amount is recorded in Stern's net income from the investment?
4. What amount is reported for the investment on the at December 31, 2019?
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... 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... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...