Chapter 12, Problem 12.24E

a)

To determine

Investment: The act of allocating money to buy a monetary asset, in order to generate wealth in the future is referred to as investment.

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Debit and credit rules:

• Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.
• Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

To Classify: The stock investment transactions in the books of Corporation ST.

b)

To determine

To journalize: The stock investment transactions under the fair value through net income method, in the books of Corporation ST.

c)

To determine

To Indicate: The effect of investment on the income of Corporation ST, before taxes.