On March 15, 2012, Boston Company acquired 5,000 shares of Richfield Corporation common stock at $45 per
Question:
Dec. 1 Boston received a cash dividend of $2.50 per share from Richfield.
31 Richfield announced earnings for the year of $150,000.
31 Richfield common stock had a closing market price of $42 per share.
Required:
1. What accounting method should be used to account for this investment? Why?
2. Prepare journal entries for the above transactions.
3. Prepare a partial income statement and balance sheet to show how the investment accounts would be shown on the 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... 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... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
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1 The investment should be accounted for as an availableforsale security because Boston Company owns ...View the full answer
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Related Book For 
Accounting concepts and applications
ISBN: 978-0538745482
11th Edition
Authors: Albrecht Stice, Stice Swain
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