Reference no: EM132864103

Question - On January 1, 2019, Long Corporation acquired 30% of the outstanding common shares of Feeley Corporation for $300,000, purchased 25% of the outstanding common shares of Holmes for $82,500, and obtained significant influence in both situations. During 2019, Feeley reported a loss of $70,000 and paid dividends of $40,000; Holmes reported income of $45,000 and paid dividends of $28,000. On January 2, 2020, Long sold all the Holmes shares for $90,000. During 2020, Feeley reported a net loss of $10,000 and did not declare and pay dividends. The fair value of the Feeley common shares at December 31, 2020 was $240,000. Long Corporation is not sure if they will keep or sell their Investment in Feeley based on Feeley's performance over the past two years.

Required -

1. Prepare the journal entries to record the events above for 2019 and record the sale of the Holmes shares on January 2, 2020. Assume Long recorded both investments under the equity method.

2. Determine the balance for Long's investment in Feeley and Investment in Holmes at the December 31, 2019. You must show a schedule or basis for these amounts.

3. Discuss how Long Corporation should account and report the Investment in Feeley in 2020.