Penny's ( oncrctc acquired 25% of the outstanding common stock of Cardinal. Inc. on January 1,2006, by paying $1,200,000 tor 50,000 shares. Cardinal declared and paid a $0.50 per share cash dividend on June 30 and again on December 31. 2006. Cardinal reported net income of $6(K).(KK) for the year. At December 31. 2006, the market puce of Cardinal's common stock was $30 pei share.

Instructions

(a) Prepare the journal entries for Penny's Concrete for 2006 assuming Penny's cannot exercise significant influence over Cardinal. (Use the cost method and assume Cardinal common siock should lx- classified as available-for-sale.)

(h) Prepare the journal entries lor Penny's Concrete for 2006. assuming Penny's can exercise significant influence over Cardinal. (Use the equity method.)

(c) In tabula) indicate the investment and income account balances at December 31.

2006, undei i h method of accounting.