Points: $0\mathrm{.}75$ of $3$

Conroy Financial paid $$510,000$ for a $30\%$ investment in the common stock of Laker, Inc. For the first year, Laker reported net income of $$290,000,$ and yat year$-$end declared and paid cash dividends of $$105,000.$ On the balance$-$sheet date, the fair value of Conroy's investment in Laker stock was $$410,000.$

Read the requirements.

Requirement $1.$ Which method is appropriate for Conroy to use in accounting for its investment in Laker? Why?

It would be appropriate for Conroy to use the method of recording its investment in Laker, Inc.

With a holding of this size, $30\%$ of the common stock, it probable that Conroy can exercise significant influence on the operations of Laker, Inc.

Requirement $2.$ Show everything that Conroy would report for the investment and any investment revenue in its year$-$end financial statements.

Balance Sheet $($partial$)$:

Assets

Long$-$term assets:

Equity method investment

Income Statement $($partial$)$:

Other revenue:

Equity method investment revenue