Pls Help ASAP (thank you in advance) Felicia Company acquired 20,000 of the 80,0

Question

Pls Help ASAP (thank you in advance)

Felicia Company acquired 20,000 of the 80,000 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:

Felicia Company acquired 20,000 of the 80,000 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:

Felicia Company acquired 20,000 of the 80,000 shares of outstanding common stock of Nueces Corporation as a long-term Investment. The annual accounting perlod for both companles ends December 31. The following transactions occurred during the year Jan. 10 Purchased 20,000 shares of Nueces common stock at $16 per share. Dec. 31 Nueces Corporation reported net income of $97,000. Dec. 31 Nueces Corporation declared and pald a cash dividend of $0.50 per share. Dec. 31 Determined the falr value of Nueces stock to be $15 per share.

Explanation / Answer

% of holdig= 20000 / 80000 = .25 or 25%

Date Title Debit credit jan 10 Investment   in nueces 320,000 cash     (20000* 16) 320,000 [being investment made] dec 31 Investment 24250 Investment income   (97000*.25) 24250 [being share in income recorde] dec 31 cash 10000 Investment    (.5*20000) 10000 [being dividend received] dec 31 No entry is required under equity method for increase in fair value as long term investment is recorded at cost

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