The following information relates to the activity in the short-term investment account of Lido International, which held no short-term investments as of January 1:

a. Prepare journal entries for each transaction, excluding the June 30 adjusting entry. Use the asset account "Short-Term Equity Investments," and assume that dividends were declared and paid on the same day.
b. Prepare the June 30 adjusting entry and describe the effect on reported income, assuming that (1) current accounting rules are used to account for Able and Baker shares and (2) historical cost rules are used to account for Able and Baker shares.
c. Which reporting method most accurately reflects the underlying economic reality of this investment? Explain.

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Purchased 10 shares of Able Co. stock at $14 per share. Purchased 20 shares of Baker Co. stock at $26 per share. Received dividends from Able Co. of $1 per share. Sold 5 shares of Able Co. for $15 per share. Received dividends from Baker Co. of $2 per share. Sold 5 shares of Baker Co. for $22 per share. Market value of Able shares is $17 per share. Market value of Baker shares is $20 per share. 1. January 28 2. February 18 3. March 15 4. April 29 5. May 18 6. June 1 7. June 30