Problem: Gioia Company acquired some of the 79,000 shares of outstanding common stock (no par) of Tristezza Corporation during the current year as a long-term investment. The annual accounting period for both companies ends December 31. The following transactions occurred during the current year:
Jan. 10 purchased 17,875 shares of Tristezza common stock at $19 per share.
Dec. 31
a) Received the current year financial statements of Tristezza Corporation that reported net income of $96,000.
b) Tristezza Corporation declared a cash dividend of $0.6 per share.
c) Tristezza Corporation paid the cash dividend declared in (b).
d) Determined the market price of Tristezza stock to be $18 per share.
Required: Show how the long-term investment and the related revenue should be reported on the current year's financial statements (balance sheet and income statement) of the Gioia Company.
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