On January 1, 2017, Nover Solar Systems purchased 10,000 shares of Reilly Manufacturing for $190,000. The investment represented 25 percent of Reilly’s outstanding common stock. Nover intended to hold the investment indefinitely. During 2017, Reilly earned net income of $75,000, and during 2018, Reilly suffered a net loss of $6,000. Reilly paid dividends both years of $1.50 per share.
a. Prepare all relevant journal entries that would be recorded on Nover’s books during 2017 and 2018.
b. Compute the book value of Nover’s long-term equity investment account as of December 31, 2017, and December 31, 2018.