Felicia Company acquired some of the 60,000 outstanding common shares of Nueces Corporation during 2017, as a

Question:

Felicia Company acquired some of the 60,000 outstanding common shares of Nueces Corporation during 2017, as a non-current investment. The fiscal year for both companies ends December 31. The following transactions occurred during 2017:
Jan. 10 Purchased 21,000 of Nueces common shares at $12 per share.
Dec. 31 a. Received the 2017 financial statements of Nueces Corporation that reported net earnings of $90,000.
b. Nueces Corporation declared and paid a cash dividend of $0.60 per share.
c. Determined the market price of Nueces stock to be $11 per share. The decrease in price is not considered an impairment in the value of the investment.

Required:
1. What accounting method should the company use? Why?
2. Prepare the journal entries for each of these transactions. If no entry is required, explain why.
3. Show how the non-current investment and the related revenue should be reported on the 2017 financial statements (statement of financial position and statement of earnings) of the company.

Financial Statements
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