felicia company acquired some of the 65 000 shares of outstandin 255983

Felicia Company acquired some of the 65,000 shares of outstanding common stock (no-par) of Nueces Corporation during 2011 as a long-term investment. The annual accounting period for both companies ends December 31. The following transactions occurred during 2011:

Jan. 10 Purchased 22,750 shares of Nueces common stock at $11 per share.

Dec. 31 a. Received the 2011 financial statements of Nueces Corporation that reported net income of $80,000.

b. Nueces Corporation declared and paid a cash dividend of $0.60 per share.

c. Determined the market price of Nueces stock to be $10 per share.

Required:

1. What accounting method should the company use? Why?

2. Give the journal entries for each of these transactions. If no entry is required, explain why.

3. Show how the long-term investment and the related revenue should be reported on the 2011 financial statements (balance sheet and income statement) of the company.

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