EQUITY METHOD FOR LONG-TERM INVESTMENTS IN COMMON STOCK.

On January 1, 19x2, Boulder, Inc., acquired 25% of the outstanding stock (2,000 of 8,000 outstanding shares) of Colorado Corporation for $100,000 ($50 per share). Colorado declares and pays an annual cash dividend on September 30 of each year—$1 f per share on September 30, 19x2, and $2.50 per share on September 30, 19x3. Colorado reported a net loss of $16,000 for 19x2 and net income of $40,000 for 19x3. Assume that the acquisition cost of the investment equals the book value of the related stockholders’

equity on the investee’s books.

REQUIRED:

1. Write the journal entries made by Boulder, Inc., to record the events related to its investment in Colorado Corporation.

2. Give the title and amount of each item (except cash) on the December 31, 19x3, balance sheet related to the investment. Name the balance sheet section in which each item appears.