Prepare the following journal entries. Be sure all dates agree with the problem and are not todays date.

Cost method:

Year 2014

Jan 1 Investor corporations purchased 8,000 shares (20% of investee companys outstanding stock) at a cost of $ 150,000.

May 31 Investee company declared and paid a cash dividends of $1.50 per share

Dec 31 Investee company announced that its net income for the year was $100,000 Cost method

Year 2015

Oct 1 Investee company declared and paid a cash dividend of $1.00 per share

Dec 21 Investee company announced its net income for the year in the amount of $ 80,000

Dec 31 Investor corporation sold all of its shares on investee company for $ 178,000 cash

Equity method

Year 2016

Jan 1 Investor corporations purchased 8,000 shares (20% of investee companys outstanding stock) at a cost of $ 150,000.

May 31 Investee company declared and paid a cash dividends of $1.50 per share

Dec 31 Investee company announced that its net income for the year was $100,000

Year 2017

Oct 1 Investee company declared and paid a cash dividend of $1.00 per share

Dec 21 Investee company announced its net income for the year in the amount of $ 80,000

Dec 31 Investor corporation sold all of its shares on investee company for $ 178,000 cash Required: Cost method:

Prepare journal entries for years 2014 and 2015 using the cost method, which assumes that investor does not have significant influence over Investee (for example, another corporation owns 70% of Investee Companys stock). Equity method: Prepare journal entries for years 2016 to 2017 on Investor Corporations books using the equity method, which assumes that Investor has significant influence over Investee Company.