1. On January 1, 2015, Jetsam Company purchased 10,000 shares of the stock of Flotsam, and did obtain significant influence. The investment is intended as a long-term investment. The stock was purchased for $80,000, and represents a 30% ownership stake. Flotsam made $25,000 of net income in 2015, and paid dividends of $10,000. The price of Flotsam's stock increased from $10 per share at the beginning of the year, to $12 per share at the end of the year.

Requirements:

a. Prepare the January 1 & December 31 general journal entries for Jetsam Company.

b. How much should the Jetsam Company report on the balance sheet for the investment in Flotsam as the end of 2015

2. The following is selected information from Flotsam Company for the fiscal years ended December 31, 2015: Flotsam Company had net income of $1,500,000. Depreciation was $500,000, purchases of plant assets were $1,000,000, and disposals of plant assets for $500,000 resulted in a $40,000 loss. Stock was issued in exchange for an outstanding note payable of $725,000. Accounts receivable increased by $25,000. Accounts payable decreased by $40,000. Dividends of $300,000 were paid to shareholders. Flotsam Company had interest expense of $50,000. Cash balance on January 1, 2015 was $250,000.

a. Prepare Flotsam Company's statement of cash flows for the year ended December 31, 2015 using the indirect method.