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Question: Accounting for equity method On January 1, 2016, Rusty, Inc. decides to Requirements invest in 12,250 shares of Dressage stock when the stock is selling for $12 per share. On July 1, 2016, Dressage paid a $1.00 per share cash dividend to stockholders. On December 31, 2016, Dressage reports net income of $50,000 for 2016. Assume Dressage has 35,000 shares of voting stock outstanding during 2016.

Requirements: 1. Identify what type of investment the Dressage stock is for Rusty.

2. Journalize the transactions related to Rusty's investment in the Dressage stock during 2016.

3. In what category and at what value would Rusty's report the investment on the December 31, 2016, balance sheet?

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