Fisanich Company purchased 35,000 shares of common stock of Pear Corporation as a long-term investment for $700,000. During the year, Pear Corporation reported net income of $300,000 and paid dividends of $100,000.
(a) Assuming that the 35,000 shares represent a 10% interest in Pear Corporation:
1. Prepare the journal entry to record the investment in Pear Corporation stock.
2. Prepare any entries that Fisanich Company should make in accounting for its investment in Pear Corporation stock during the year.
3. What is the balance of the Stock Investments account on Fisanich Company’s books at the end of the year?
(b) Repeat requirements (a) 1. 2. and 3. above except assume that the 35,000 shares represent a 20% interest in Pear Corporation.