Acc557 Financial Accounting: P16-4A Glaser Services acquired 30% of the outstanding common stock

Acc557 Financial Accounting

P16-4A
Glaser Services acquired 30% of the outstanding common stock of Nickels Company on January 1, 2008, by paying $800,000 for the 45,000 shares. Nickels declared and paid $0.30 per share cash dividends on March 15, June 15, September 15, and December 15, 2008. Nickels reported net income of $320,000 for the year. At December 31, 2008, the market price of Nickels common stock was $24 per share.

Instructions:
a. Prepare the journal entries for Glaser Services for 2008 assuming Glaser cannot exercise significant influence over Nickels. (Use the cost method and assume that Nickels common stock should be classified as a trading security.)
b. Prepare the journal entries for Glaser Services for 2008, assuming Glaser can exercise significant influence over Nickels. Use the equity method.
c. In tabular form, indicate the investment and income statement account balances at December 31, 2008, under each method of accounting. (If answer is zero, please enter 0. Do not leave any fields blank.)
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