P13-4A Glaser Services acquired 30% of the outstanding common stock of Nickels Company

Price: $2.50


Glaser Services acquired 30% of the outstanding common stock of Nickels Company
on January 1, 2008, by paying $800,000 for the 45,000 shares. Nickels declared and paid $0.30 per
share cash dividends on March 15, June 15, September 15, and December 15, 2008. Nickels reported
net income of $320,000 for the year. At December 31, 2008, the market price of Nickels
common stock was $24 per share.

Instructions
(a) Prepare the journal entries for Glaser Services for 2008 assuming Glaser cannot exercise significant
influence over Nickels. (Use the cost method and assume that Nickels common stock
should be classified as a trading security.)
(b) Prepare the journal entries for Glaser Services for 2008, assuming Glaser can exercise significant
influence over Nickels. Use the equity method.
(c) In tabular form, indicate the investment and income statement account balances at
December 31, 2008, under each method of accounting.