Question: (Fair Value and Equity Method Compared) Streamline Corp. acquired 30% of the 600,000 shares of outstanding common stock of Flow Inc. on January 31, 2023.

(Fair Value and Equity Method Compared) Streamline Corp. acquired 30% of the 600,000 shares of outstanding common stock of Flow Inc. on January 31, 2023. The purchase price was $4,800,000. Flow declared and paid $1.50 per share cash dividends on July 15, 2023, and on December 10, 2023. Flow reported net income of $1,500,000 for 2023. The fair value of Flow common stock was $30 per share at December 31, 2023.

Instructions

(a) Prepare the journal entries for Streamline Corp. for 2023, assuming that Streamline cannot exercise significant influence over Flow. The securities should be classified as available-for-sale.

(b) Prepare the journal entries for Streamline Corp. for 2023, assuming that Streamline can exercise significant influence over Flow.

(c) At what amount is the investment in securities reported on the balance sheet under each of these methods at December 31, 2023? What is the total net income reported in 2023 under each of these methods?

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