On July 12, 2011, Rossow Corporation purchased 1,000 shares of Reimer Company for $30,000. The following information applies to the fair value of Reimer Company:
Per Share
12/31/2011.............. $33
12/31/2012 .............. 28
12/31/2013 .............. 20
Reimer Company declares and pays cash dividends of $2 per share on May 1 of each year.
Required:
1. Prepare journal entries to record the facts in the case, assuming that Rossow considers the shares to be available-for-sale securities.
2. Prepare journal entries to record the facts in the case, assuming that Rossow considers the shares to be trading securities.
3. Prepare journal entries to record the facts in the case, assuming that Rossow uses the equity method to account for the investment. Rossow owns 30 percent of Reimer, and Reimer reported $50,000 of net income each year?