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Accounting

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.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M954483

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