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On January 1, 2014, Palsoe Corp. acquired 30 percent (13,000 shares) of Nostay Services Inc. common stock for $1,300,000 as a long-term investment. Data from Nostay's 2014 financial statements include the following:

Net income ............................................ $330,000
Less cash dividends paid .............................. 160,000
Increase in retained earnings ......................... $170,000

The market value of Nostay Services Inc. common stock on December 31, 2014, was $98 per share. Palsoe does not have any other noncurrent investments in securities.

Prepare the necessary journal entries for Palsoe's investment in Nostay Services Inc. common stock under:

(1) the cost method classified as available-for-sale securities.

(2) the equity method.

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M940050

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