Ashcroft Financial paid $480,000 for a 40% investment in the common stock of Sun, Inc. For the first year, Sun reported net income of $280,000, and at year-end declared and paid cash dividends of $145,000. On the balance-sheet date, the fair value of Ashcroft's investment in Sun stock was $380,000 Read the requirements. Requirement 1. Which method is appropriate for Ashcroft to use in accounting for its investment in Sun? Why? It would be appropriate for Ashcroft to use the equity method of recording its investment in Sun, Inc. With a holding of this size, 40% of the common stock, it is influence on the operations of Sun, Inc. Balance Sheet (partial): Assets Long-term assets. *** Requirement 2. Show everything that Ashcroft would report for the investment and any investment revenue in its year-end financial statements Equity method investment Income Statement (partial): Other revenue Equity method investment revenue probable that Ashcroft can exercise significant

Ashcroft Financial paid $480,000 for a 40% investment in the common stock of Sun, Inc. For the first year, Sun reported net income of $280,000, and at year-end declared and paid cash dividends of $145,000. On the balance-sheet date, the fair value of Ashcroft's investment in Sun stock was $380,000. Read the requirements. Requirement 1. Which method is appropriate for Ashcroft to use in accounting for its investment in Sun? Why? It would be appropriate for Ashcroft to use the method of recording its investment in Sun, Inc. With a holding of this size, 40% of the common stock, it probable that Ashcroft can exercise significant influence on the operations of Sun, Inc. Requirement 2. Show everything that Ashcroft would report for the investment and any investment revenue in its year-end financial statements