Heidebrecht Design acquired 20% of the outstanding common stockof Quayle Company on January 1, 2014, by paying $800,000 for the30,000 shares. Quayle declared and paid $0.30 per share cashdividends on March 15, June 15, September 15, and December 15,2014. Quayle reported net income of $320,000 for the year. AtDecember 31, 2014, the market price of Quayle common stock was $34per share.


(a) Prepare the journal entries for Heidebrecht Design for 2014assuming Heidebrecht Design cannot exercise significant influenceover Quayle. (Use the cost method and assume that Quayle commonstock should be classified as a trading security.)

Total dividend revenue $36,000

(b) Prepare the journal entries for Heidebrecht Design for 2014,assuming Heidebrecht Design can exercise significant influence overQuayle. Use the equity method.

Revenue from stock investments $64,000

(c) Indicate the balance sheet and income statement account balancesat December 31, 2014, under each method of accounting.


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