EQUITY SECURITIES

1. Fair value and equity methods.

Prepare journal entries for the following transactions, assuming ABC uses (a) the fair value method and (b) the equity method for accounting for its investments in XYZ Co.

1. At the beginning of the year 2018, ABC bought 20% of XYZ's common stock at its book value. Total book value of all XYZ's common stock was $800,000 on this date.
2. During the year 2018, XYZ reported $60,000 of net income and paid $30,000 of dividends.
3. During the year 2019, XYZ reported a net loss of $10,000 and paid $5,000 of dividends.