Felicia Company acquired 21,000 of the 60,000 shares of outstanding common stock of Nueces Corporation as a

Question:

Felicia Company acquired 21,000 of the 60,000 shares of outstanding of Nueces as a long- term investment. The annual accounting period for both companies ends December 31. The following transactions occurred during the year:
Jan. 10 Purchased 21,000 shares of Nueces at $ 12 per share.
Dec. 31 Nueces reported net income of $ 90,000.
Dec. 31 Nueces declared and paid a cash of $ 0.60 per share.
Dec. 31 Determined the fair value of Nueces stock to be $ 11 per share.
Required:
1. What accounting method should the company use? Why?
2. Give the journal entries for each of these transactions. If no entry is required, explain why.
3. Show how the long- term investment and the related revenue should be reported on the of Felicia Company. Financial Statements
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