On January 1, 2017, Pearl Corp. purchased 40,000 of the 100,000 outstanding common shares of M. Krab Corporation for $52 per share cash. During the year, M. Krab Corporation paid $6.20 per share cash dividends and reporrted $1,010,000 of net income. At the end of the 2017, the M. Krab Corporation stock is selling at $62 per share.

Pearl Corp. must use the equity method of accounting for this investment. Why?

Why is the equity method never used when preferred stock is purchased?

What are two events that provide "evi dence" that a corporation is exerting significant influence over another corporation when 20-50% of the outstanding stock is purchased.

Give the general journal entries to record the investment transactions for Pearl Corp. for 2017 using the equity method of accounting. DATE/ACCOUNT TITLE/DR/CR

Indicate the accounts and their balances to be reported on the 2017 financial statements:

Income Statement: Balance Sheet:

Why doesn't Pearl Corp. have to prepare consolidated financial statements? What are consolidated financial statements? What does the balance of the account "Noncontrolling Interest" represent?