On January 1, 2014, XYZ Company purchased 10,000 shares of the stock of Rayco, and did obtain
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Question:
On January 1, 2014, XYZ Company purchased 10,000 shares of the stock of Rayco, and did obtain significant influence. The investment is intended as a long-term investment. The stock was purchased for $90,000, and represents a 30% ownership stake. Rayco made $25,000 of net income in 2014, and paid dividends of $10,000. The price of Rayco's stock increased from $10 per share at the beginning of the year, to $12 per share at the end of the year.
Requirements:
- Prepare the January 1 and December 31 general journal entries for XYZ Company.
- How much should the XYZ Company report on the balance sheet for the investment in Rayco at the end of 2014?
Expert Answer:
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