On April 20, 2003, Samson Company acquired 20,000 shares of Salem Industries common stock at $38 per

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On April 20, 2003, Samson Company acquired 20,000 shares of Salem Industries common stock at $38 per share as a long-term investment. Salem has 50,000 shares of outstanding voting common stock. The following additional information is presented for the calendar year ended December 31, 2003: Nov. 20 Samson received a cash dividend of $2 per share from Salem Industries. Dec. 31 Salem announced earnings for the year of $135,000. 31 Salem Industries common stock had a closing market price of $35 per share. 1. Interpretive Question: What accounting method should be used by Samson Company to account for this investment? Why? 2. Prepare journal entries for the transactions and events described.

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