Investments in Equity Securities On March 15, 2009, Boston Company acquired 5,000 shares of Richfield Corporation common stock at $45 per share as a long-term investment. Richfield has 50,000 shares of outstanding voting common stock. Boston does not own any other stocks. The following additional events occurred during the fiscal year ended December 31, 2009:

Dec. 1 Boston received a cash dividend of $2.50 per share from Richfield Corporation.

31 Richfield Corporation announced earnings for the year of $150,000.

31 Richfield common stock had a closing market price of $42 per share.

Required:

1. What accounting method should be used to account for this investment? Why?

2. Prepare journal entries for the above transactions.

3. Prepare a partial income statement and balance sheet to show how the investments accounts would be shown on the financial statements.