26 Methods for accounting for investments in other companies (12 points)

Big Company has purchased 50,000 shares of stock of Smaller Company. This represents 20% ownership. What journal entry, if any would Big make in the following situations:

A. The market value of the stock of Smaller increases by $4 per share during the year. Assume Big uses the fair value method of accounting for its investment? (3 points)

B. What would the journal entry be for the situation described in part A if Big uses the equity method of accounting for its investment? (3 points)

C. Smaller declares and immediately pays dividends equal to $2 per share. Assume Big uses the fair value method of accounting for its investment. (3 points) D. What would the journal entry be for the situation described in part C if Big used the equity method of accounting for its investment? (3 points)