Under the cost method and the equity method

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Reference no: EM131215705

On January 1, 2014, Brown Corp. acquired 40% (10,000 shares) of Blue Company common stock for $1,000,000 as a long-term investment. Data from Blue’s 2014 financial statements include the following:

Net income $500,000

Less cash dividends paid 200,000

Increase in retained earnings $300,000

The market value of Blue Company common stock on December 31,2014 was $95 per share. Brown does not have any other noncurrent investments in securities.

Prepare the necessary journal entries for Brown’s investment in Blue under the cost method and the equity method.

Reference no: EM131215705

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