103) An investor has purchased the stock of another company throughout the year and owns 8% of the common shares of the other company at the end of 2010. The stock is considered by the investor to be an available for sale investment. What method should this investor use to account for this investment?
104) On January 1, 2009 Blue Cat Corporation purchased 1,000 shares (5%) of Mike Mouse Co. for $10,000 as a long term investment. On March 31, 2010 Mike Mouse pays Blue Cat a $5,000 dividend. At year end December 31, 2010 Mike Mouse shares are trading at 12 per share. Blue Cat then sells their investment in Mike Mouse Co for $11,500 on February 4, 2011. Prepare Blue Cat's journal entries for 2009, 2010 and 2011.
105) On January 1, 2009 Blue Cat Corporation purchased 1,000 shares (5%) of Mike Mouse Co. for $14,000 as a long term investment. On May 31, 2010 Mike Mouse pays a $0.70 dividend. At year end December 31, 2010 Mike Mouse shares are trading at 15 per share. Blue Cat then sells their investment in Mike Mouse Co for $13,500 on February 20, 2011. Prepare Blue Cat's journal entries for 2009, 2010 and 2011.
106) Energy Direct Corp. acquired 32% of Edmonton Limited for $2,000,000 on January 1, 2011. During 2011, Edmonton Limited earned $480,000 and paid dividends of $225,000.
a. Prepare the journal entries required to record the acquisition, and the transactions during 2011.
b. Determine the carrying value on Energy Direct Corp. of the investment in Edmonton Limited as at December 31, 2011.
107) When the equity method is used to account for a stock investment, dividends received are recorded as a reduction to the Investment account and the investor's share of income reported by the investee is treated as an increase in the Investment account. Explain why the investment is accounted for in this fashion.