P 13-15 LO6 1207 2018 Feb. Dec. 1 Long-Term Investments in Stock--FVTOCI Financial Assets-Equity and Equity Method The following activities relate to Merrill Company during the years 2018 and 2019: 15 Merrill purchased 10,000 shares of Hendershot Equipment stock for $40 per share. Merrill received an $0.80-per-share cash dividend from Hendershot Equipment. 31 Hendershot Equipment common stock had a closing market price of $37 per share. Hendershot's 2018 net income was $120,000. 2019 July 1 Merrill sold all 10,000 shares of Hendershot Equipment stock for $42 per share. Additional information: Hendershot Equipment had 50,000 shares of common stock outstanding on January 1, 2018 Required: 1. Prepare journal entries to record the transactions assuming: a. The securities are classified as FVTOCI financial assets-equity. b. The equity method is used. 2. Show the amounts that would be reported on the financial statements of Merrill Company at December 31, 2018, under each assumption. 3. Interpretive Question: Can Merrill use equity method to account for its investment in Hendershot Equipment