Fair Value and Equity Methods}

Nadal Corporation purchased 10.000 common shares of Beck Inc., on January 1, 2018, for \(\$ 100,000\). During 2018, Beck declared and paid cash dividends to Nadal in the amount of \(\$ 8.000\). Nadal's share of Beck's net income for 2018 was \(\$ 12.400\). At December 31, 2018, the fair value of the 10,000 shares was \(\$ 120,000\). This is Nadal's only investment.

\section*{Required:}

1. Assume that Beck has 75,000 common shares outstanding. What journal entries will Nadal make during 2018 relative to this investment?

2. Assume that Beck has 40.000 common shares outstanding. What journal entries will Nadal make during 2018 relative to this investment?

\section*{OBJECTIVE (1) Exercise