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Requirement 1. Identify the appropriate accounting method for each of the following situations:

		Accounting Method
a.	Investment in 45% of the investee company's stock of which the investor has significant influence
b.	Available-for-sale debt investment
c.	Investment in more than 50% of the investee company's stock
d.	Bond investment that matures in three years. The investor plans to hold the bond for the full
	three years.

Requirement 2. At what amount should the following trading investment portfolio be reported on the December 31,

20182018,

balance sheet? Journalize any adjusting entry required on December 31.

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(Click the icon to review the trading investment portfolio.)

The total trading investment portfolio should be reported at $

on the December 31, 2018 balance sheet.

Journalize any adjusting entry required on December 31. (Record debits first, then credits. Select the explanation on the last line of the journal entry table. If no entry is required, select "No entry required" on the first line of the Accounts and Explanations column and leave the remaining cells blank.)

Date			Accounts and Explanations	Debit	Credit
2018
Dec. 31

Requirement 3. An investor paid

$ 72 comma 500$72,500

on January 1,

20182018,

to acquire

3030%

of

Drop In minus DudeDrop InDude,

Inc.'s outstanding common stock. The investor had significant control of

Drop In minus DudeDrop InDude,

Inc. For the year endind December 31,

20182018,

Drop In minus DudeDrop InDude's

net income was

$ 60 comma 000$60,000,

and on June 14, the company declared and paid cash dividends of

$ 15 comma 000$15,000

to all stockholders. Journalize the investor's transactions related to the

Drop In minus DudeDrop InDude

investment: (a) purchase of the investment, (b) receipt of dividends, (c) investor's share of net income, and (d) sale of

Drop In minus DudeDrop InDude

stock for

$ 89 comma 100$89,100

on January 3,

20192019.

(Record debits first, then credits. Select the explanation on the last line of the journal entry table. If no entry is required, select "No entry required" on the first line of the Accounts and Explanations column and leave the remaining cells blank.)(a) Begin by journalizing the investor's purchase of the

Drop In minus DudeDrop InDude

investment. An investor paid

$ 72 comma 500$72,500

on January 1,

20182018,

to acquire

3030%

of

Drop In minus DudeDrop InDude,

Inc.'s outstanding common stock.

Date			Accounts and Explanations	Debit	Credit
2018
(a) Jan. 1

(b) Journalize the receipt of dividends. On June 14,

Drop In minus DudeDrop InDude

declared and paid cash dividends of

$ 15 comma 000$15,000

to all stockholders.

Date			Accounts and Explanations	Debit	Credit
2018
(b) Jun. 14

(c) Journalize the investor's share of net income. During the first year,

Drop In minus DudeDrop InDude's

net income was

$ 60 comma 000$60,000.

Date			Accounts and Explanations	Debit	Credit
2018
(c) Dec. 31

(d) Journalize the sale of

Drop In minus DudeDrop InDude

stock for

$ 89 comma 100$89,100

on January 3,

20192019.

Date			Accounts and Explanations	Debit	Credit
2019
(d) Jan. 3

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