Problem
Stock Investments. During 2016, Stockman Company began investing in the common stock of other companies. Journalize the following activities using the appropriate account titles. For any accounts that would affect the income statement, indicate (I/S) next to the account title; for any accounts that would affect Other Comprehensive Income indicate (OCI) next to the account title.
1. In January, Stockman purchased 4,000 shares of the outstanding stock of Edgar Company (this represented a 40% investment in Edgar Company) at a price of $18 per share.
2. In February, Stockman purchased 1,000 shares of the outstanding stock of Archer Company for $12 per share. This investment was classified as Available-for-sale.
3. In March, Stockman purchased 2,000 shares of the outstanding stock of Turner Company for $20 per share. This investment was classified as a Trading investment.
4. In April, Edgar Company declared and paid a total cash dividend of $30,000 to its owners.
5. In May, Archer Company paid a $1 per share dividend to its owners.
6. On December 31, each of these companies reported net income to their owners in the following amounts:
Edgar, $80,000 net income
Archer, $50,000 net income
Turner, $100,000 net income
7. At December 31, the following per share amounts were reported for each of Stockman's investments:
Edgar Company $25 per share
Archer Company $16 per share
Turner Company $18 per share
8. What is the total effect (note amount and direction) on net income from the previous journal entries?
9. What is the total effect (note amount and direction) on other comprehensive income from the previous journal entries?