On March 20, 2012, Reeder Company acquired 100,000 shares of Needed Industries common stock at $32 per

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On March 20, 2012, Reeder Company acquired 100,000 shares of Needed Industries common stock at $32 per share as a long-term investment. Needed has 250,000 shares of outstanding voting common stock. The following additional information is presented for the calendar year ended December 31, 2012:

Nov. 15 Reeder received a cash dividend of $1.00 per share from Needed.

Dec. 31 Needed announced earnings for the year of $300,000.

31 Needed common stock had a closing market price of $28 per share.

Required:

1. Interpretive Question: What accounting method should be used by Reeder to account for this investment? Why?

2. Prepare journal entries for the transactions and events described.


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...
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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Related Book For  answer-question

Accounting concepts and applications

ISBN: 978-0538745482

11th Edition

Authors: Albrecht Stice, Stice Swain

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