Universal Company was organized on January 1, 1989, for the purpose of investing in the shares of other companies. Universal Company immediately issued 46,000 shares of \(\$ 5\) par, common stock for which it received \(\$ 230,000\) cash. On January 7, 1989, Universal Company purchased 20,000 shares (20\%) of Suburban Company's outstanding stock at a cost of \(\$ 230,000\). The following transactions and events subsequently occurred:

1989 May 20 Suburban Company declared and paid a cash dividend of \(\$ 0.90\) per share.

Dec. 31 Suburban Company announced that its net income for the year was \(\$ 150,000\).

1990 July 8 Suburban Company declared and issued a stock dividend of one share for each four shares already outstanding.

Nov. 15 Suburban Company declared and paid a cash dividend of \(\$ 0.70\) per share.

Dec. 31 Suburban Company announced that its net income for the year was \(\$ 160,000\).

1991 Jan. 4 Universal Company sold all of its investment in Suburban Company for \(\$ 240,000\) cash.
Part 1. Because Universal Company owns \(20 \%\) of Suburban Company's outstanding stock, Universal Company is presumed to have a significant influence over Suburban Company.
\section*{Required}
1. Give the entries on the books of Universal Company to record the above events regarding its investment in Suburban Company.
2. Calculate the cost per share of Universal Company's investment, as reflected in the investment account on January 3, 1991.
3. Calculate Universal Company's retained earnings balance on January 5, 1991, after a closing of the books.
Part 2. Although Universal Company owns \(20 \%\) of Suburban Company's outstanding stock, a thorough investigation of the surrounding circumstances indicates that Universal Company does not have a significant influence over Suburban Company, and the cost method is the appropriate method of accounting for the investment.
\section*{Required}
1. Give the entries on the books of Universal Company to record the above events regarding its investment in Suburban Company.
2. Calculate the cost per share of Universal Company's investment, as reflected in the investment account on January 3, 1991.
3. Calculate Universal Company's retained earnings balance on January 5, 1991, after a closing of thẹ books.
Problem 15-2A Consolidated statements, at acquisition and one year later (L.O. 4)