On January 1, 1996, Nover Solar Systems purchased 10,000 shares of Reilly Manufacturing for $190,000. The investment represented 25 percent of Reilly’s outstanding common stock. Nover intended to hold the investment indefinitely. During 1996 Reilly earned net income of $75,000, and during 1997 Reilly suffered a net loss of $6,000. Reilly paid dividends both years of $1.50 per share. REQUIRED:

a. Prepare all relevant journal entries that would be recorded on Nover’s books during 1996 and 1997.

b. Compute the book value of Nover’s Long-Term Equity Investment account as of December 31, 1996, and December 31, 1997.