Ice Company purchased 10,000 shares of common stock of the Water Corporation as a short-term investment for $220,000. During the year, Water Corporation reported net income of $100,000 and paid dividends of $40,000. The stock had a market value of $21 per share at the end of the year.

(a) Assuming that the 10,000 shares represent a 25% interest in Water Corporation:

1. Prepare the journal entry to record the investment in Water stock.

2. Prepare any entries that Ice Company should make in accounting for its investment

in Water stock during the year.

(b) Repeat requirement (a) above except assume that the 10,000 shares represent a 10% interest in Water Corporation. Ice intends to hold the investment for many years.

1. Prepare the journal entry to record the investment in Water stock.

2. Prepare any entries that Ice Company should make in accounting for its investment in

Water stock during the year.