3.

18 marks

On January 1, Ball Company purchased shares of Leftwich Company common stock

a.

Assume that the stock acquired by Ball represents 15% of Leftwich stock and that Ball classifies the investment as AFS. Prepare journal entries to record the following transactions:

i. Ball purchased 5,000 C/S of Leftwich at $15 cash per share.

ii. Leftwich reported annual NI of $40,000.

iii. Ball received a cash dividend of $1.10 per share from Leftwich.

iv. Year-end market price of Leftwich common stock is $19

v. Ball reports how much income for the year and the value of investment at the end of the year on its B/S? (No journal entries required for this question)

b.

Assume that the stock acquired by Ball represents 30% of Leftwich stock and that Ball accounts for the investment using the Equity method. Prepare journal entries to record the following transactions:

i. Ball purchased 5,000 C/S of Leftwich at $15 cash per share.

ii. Leftwich reported annual NI of $40,000.

iii. Ball received a cash dividend of $1.10 per share from Leftwich.

iv. Year-end market price of Leftwich common stock is $19

v. Ball reports how much income for the year and the value of investment at the end of the year on its B/S? (No journal entries required for this question)