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On January 1, 2020, Redmond Company purchased 3,000 of the 15,000 outstanding shares of common stock of Decca Computer (DC) Corporation for $80,000 cash as
On January 1, 2020, Redmond Company purchased 3,000 of the 15,000 outstanding shares of common stock of Decca Computer (DC) Corporation for $80,000 cash as a long-term investment (the only long-term equity invest- ment held). The assets and liabilities of DC Corporation at the date of purchase approximate fair value. During 2020, DC reported net income of $25,000 and declared and paid cash dividends of $10,000. The fair value of DC Corporation at December 31, 2020, was $25 per share. Required a. Prepare the journal entries to record the purchase of the investment, the receipt of dividends, and the year- end adjusting entry, assuming that the investment is recorded under the equity method. b. Record the journal entries assuming instead that Redmond Company opted on the purchase date to account for the investments using the fair value option
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