Using the data in EA-5, answer the following questions:

Data from in EA-5

Gioia Company acquired some of the 65,000 shares of outstanding common stock (no par) of Tristezza Corporation during the current year as a long-term investment. The annual accounting period for both companies ends December 31. The following transactions occurred during the current year:

Required:

1. On the current year cash flow statement, how would the investing section of the statement be affected by the preceding transactions?

2. On the current year cash flow statement (indirect method), how would the equity in the earnings of the affiliated company and the dividends from the affiliated company affect the operating section? Explain the reasons for the effects.

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Jan. 10 Dec. 31 Purchased 17,875 shares of Tristezza common stock at $11 per share. a. Received the current year financial statements of Tristezza Corporation that reported net income of $80,000. b. Tristezza Corporation declared a cash dividend of $0.60 per share. c. Tristezza Corporation paid the cash dividend declared in (b). d. Determined the market price of Tristezza stock to be $10 per share.