On January 1, Rurk Corporation purchased, as long-term investments, 8 percent of the voting stock of Star

Question:

On January 1, Rurk Corporation purchased, as long-term investments, 8 percent of the voting stock of Star Corporation for $1,000,000 and 45 percent of the voting stock of Mit Corporation for $8,000,000. During the year, Star had earnings of $400,000 and paid dividends of $160,000. Mit Corporation had earnings of $1,200,000 and paid dividends of $800,000. The market value did not change for either investment during the year. Which of these investments should be accounted for using the cost-adjusted-to-market method? Which should be accounted for using the equity method? At what amount should each investment be carried on the balance sheet at year-end? Give a reason for each choice.

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... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...