Investments in StocksEquity Method On March 20, 2009, Reeder Company acquired 80,000 shares of Needed Industries common

Question:

Investments in Stocks—Equity Method On March 20, 2009, Reeder Company acquired 80,000 shares of Needed Industries common stock at $32 per share as a long-term investment. Needed has 200,000 shares of outstanding voting common stock. The following additional information is presented for the calendar year ended December 31, 2009:

Nov. 15 Reeder received a cash dividend of $1.50 per share from Needed Industries.

Dec. 31 Needed announced earnings for the year of $250,000.

31 Needed Industries common stock had a closing market price of $28 per share.

Required:

1. Interpretive Question: What accounting method should be used by Reeder Company to account for this investment? Why?

2. Prepare journal entries for the transactions and events described.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Accounting Concepts And Applications

ISBN: 9780324376159

10th Edition

Authors: W. Steve Albrecht, James D. Stice, Earl K. Stice, Monte R. Swain

Question Posted: