1. a. What method of accounting is used for long-term investments in stock in which there is significant influence over the investee?
b. Under what caption are long-term investments in stock reported on the balance sheet?
2. Plaster Inc. received a $0.15-per-share cash dividend on 50,000 shares of Gestalt Corporation common stock, which Plaster Inc. carries as a long-term investment. Assuming that Plaster Inc. uses the equity method of accounting for its investment in Gestalt Corporation, what account would be credited for the receipt of the $7,500 dividend?
3. An annual report of The Campbell Soup Company reported on its income statement $2.4 million as "equity in earnings of affiliates." Journalize the entry that Campbell would have made to record this equity in earn- ings of affiliates.
4. Where are investments in bonds that are classified as held-to-maturity securities reported on the balance sheet?
5. At what amount are held-to-maturity investments in bonds reported on the balance sheet?
6. Microsoft Corporation stock recently traded at $26 per share and had earnings per share of $0.92. Determine Microsoft's price-earnings ratio. Round to two decimal places.