QUESTION 21

1. Alpha Company has purchased 10,000 shares of stock of Beta Company for $50,000,000. This represents 20% ownership. What journal entry, if any would Alpha make in the following situation:

   Beta declares and immediately pays a dividend of $1 per share. Assume Alpha uses the equity method of accounting for its investment? (3 points)

2. Refer to the same facts as the previous problem.

   What would be the journal entry be if Alpha learns that the value of Betas stock has increased by $2 per share, and Alpha uses the equity method of accounting for this investment? (3 points)

3. Use the same facts as the prior problems. What journal entry, if any, would make in this situation?

   Alpha learns that Beta had a loss of $1 million. Assume Alpha uses the fair value method of accounting for its investment. (3 points)