Reference no: EM132902885

Big Co. purchases shares of Little Co starting on 1/1/21. Little Co. has 100,000 shares of stock outstanding.

Relevant data shown below:

• 1/1/21: Purchased 5,000 shares at $18/share, plus $10 commission.
• 11/1/21: Little Co. paid common dividends totaling $10,000
• 12/31/21: Little Co. stock trading at $20/share
• 4/1/22: Purchased 6,000 shares at $21/share, plus $10 commission
• 11/1/22: Little Co. paid dividends totaling $10,000
• 12/31/22: Little Co stock trading at $19/share
• 3/1/23: Sold 1,000 shares of Little Co stock at $19.50/share, less $10 commission.

Assume Big uses FIFO to account for their investment in these shares.

Required: Prepare entries to record the preceding transactions, and answer the following questions.

Problem 1: What would be recorded as the cost of the investment on 1/1/21?

Problem 2: How much of an unrealized gain or loss is recorded at 12/31/21?

Problem 3: How much is received as dividends on 11/1/22?

Problem 4: What is the balance in the "investment in Little" account at 12/31/22?