Prepare the journal entries that water should make

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At the beginning of 20X7, Water Ltd. acquired 35 percent of the outstanding shares of Solid Co. at a cost of $210,000. There were no acquisition differentials or fair value adjustments related to the acquisition. Solid has reported the following information:

Year   Net income             Dividend paid on December 31
20X7       $56,000              $42,000
20X8       $64,200            $56,000

The fair value of Water investment in Solid is $252,000 at the end of 20X7 and $259,000 at the end of 20X8. Both Water and Solid have December 31 year-ends.

Required:

Question 1: Prepare the journal entries that Water should make relating to its investment in Solid for 20X7 and 20X8 under each of the following methods:

a) the cost method
b) the equity method
c) FVTPL
d) FVTOCI

Reference no: EM132552199

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