Heidebrecht Design acquired 20% of the outstanding common stock of Quayle Company on January 1, 2017, by

Question:

Heidebrecht Design acquired 20% of the outstanding common stock of Quayle Company on January 1, 2017, by paying $800,000 for the 30,000 shares. Quayle declared and paid $0.30 per share cash dividends on March 15, June 15, September 15, and December 15, 2017. Quayle reported net income of $320,000 for the year. At December 31, 2017, the market price of Quayle common stock was $34 per share.

Instructions

(a) Prepare the journal entries for Heidebrecht Design for 2017 assuming Heidebrecht Design cannot exercise significant influence over Quayle. (Use the cost method and assume that Quayle common stock should be classified as a trading security.)

(b) Prepare the journal entries for Heidebrecht Design for 2017, assuming Heidebrecht Design can exercise significant influence over Quayle. Use the equity method.

(c) Indicate the balance sheet and income statement account balances at December 31, 2017, under each method of accounting.

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...