Suppose Walla Walla Company had paid $175,000 to Freewater Company for an investment in

10,000 shares of the $5 par value preferred stock of Freewater Company. The preferred stock was

later converted into 10,000 shares of Freewater Company common stock ($1 par value).

1. If using the balance sheet equation, How would you analyze of transactions of Walla Walla Company

and Freewater Company.

2. how would you prepare the journal entries to accompany your analysis in requirement 1.