Felicia Company acquired 21,000 of the 60,000 shares of outstanding common stock of NuecesCorporation as a long-term investment. The annual accounting period for both companies endsDecember 31. The following transactions occurred during the year:Jan. 10 Purchased 21,000 shares of Nueces common stock at $12 per share.Dec. 31 Nueces Corporation reported net income of $90,000.Dec. 31 Nueces Corporation declared and paid a cash dividend of $0.60 per share.Dec. 31 Determined the fair value of Nueces stock to be $11 per share.Required:1. What accounting method should the company use? Why?2. Give the journal entries for each of these transactions. If no entry is required, explain why.3. Show how the long-term investment and the related revenue should be reported on the financial statements of Felicia Company.
Felicia Company acquired 21,000 of the 60,000 shares of outstanding common stock of Nueces
Corporation as a long-term investment. The annual accounting period for both companies ends
December 31. The following transactions occurred during the year:
Jan. 10 Purchased 21,000 shares of Nueces common stock at $12 per share.
Dec. 31 Nueces Corporation reported net income of $90,000.
Dec. 31 Nueces Corporation declared and paid a cash dividend of $0.60 per share.
Dec. 31 Determined the fair value of Nueces stock to be $11 per share.
Required:
1. What accounting method should the company use? Why?
2. Give the
3. Show how the long-term investment and the related revenue should be reported on the financial statements of Felicia Company.
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