(Solution) - Felicia Company acquired 21 000 of the 60 000 shares of outstanding -(2025 Original AI-Free Solution)

Paper Details

Felicia Company acquired 21,000 of the 60,000 shares of outstanding common stock of Nueces Corporation during 2013 as a long-term investment. The annual accounting period for both companies ends December 31. The following transactions occurred during 2013:
Jan. 10 Purchased 21,000 shares of Nueces common stock at $12 per share.
Dec. 31 Nueces Corporation reported net income of $90,000.
Dec. 31 Nueces Corporation declared and paid a cash dividend of $0.60 per share.
Dec. 31 Determined the fair value of Nueces stock to be $11 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 2013 financial statements of Felicia Company?