During January 2004, Crystal Company purchased the following shares as a long-term investment:

Required: 1. What accounting method should be used for the investment in Q common stock? R preferred stock? Why? 2. Give the journal entries for the company for each year in parallel columns (if none, explain why for each of the following:

a. Purchase of the investments.

b. Income reported by Q and R Corporations.

c. Dividends received from Q and R Corporations.

d. Market value effects at year-end. 3. For each year, show how the following amounts should be reported on the financial statements:

a. Long-term investment.

b. Stockholders' equity—net unrealized gains and losses.

c. Revenues.

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Stock Q Corporation Common (no-par) R Corporation Preferred. nonvoting (par $10) Number of Shares Outstanding 90,000 20.000 Subsequent to acquisition, the following data were available: Net income reported at December 31 Q Corporation R Corporation Dividends declared and paid per share during the year Q Corporation common stock R Corporation preferred stock Market value per share at December 31 Q Corporation common stock R Corporation preferred stock Cost per Purchase Share 12,600 $ 5 12,000 30 2004 2005 $30.000 $36,000 40.000 48.000 $0.80 $0.85 0.90 0.90 $ 4.00 $ 4.00 29.00 30.00