On March 20, 2018, Reeder Company acquired 40,000 shares of Needed Industries common stock at $64 per share as a long-term investment. Needed has 100,000 shares of outstanding voting common stock. The following additional information is presented for the calendar year ended December 31, 2018: Nov. 15 Reeder received a cash dividend of $3.00 per share from Needed Industries. Dec. 31 Needed announced earnings for the year of $250,000. Dec. 31 Needed Industries common stock had a closing market price of $56 per share. 2019: Jan. 6 Reeder sold a quarter of its shares of Needed Industries at a price of $70 per share. Required: 1. What accounting method should be used by Reeder Company to account for this investment? Why? 2. Prepare journal entries for the transactions and events described.
On March 20, 2018, Reeder Company acquired 40,000 shares of Needed Industries common stock at $64 per share as a long-term investment. Needed has 100,000 shares of outstanding voting common stock. The following additional information is presented for the calendar year ended December 31, 2018:
Nov. 15 Reeder received a cash dividend of $3.00 per share from Needed Industries.
Dec. 31 Needed announced earnings for the year of $250,000.
Dec. 31 Needed Industries common stock had a closing market price of $56 per share.
2019:
Jan. 6 Reeder sold a quarter of its shares of Needed Industries at a price of $70 per share.
Required:
1. What accounting method should be used by Reeder Company to account for this investment? Why?
2. Prepare
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