P13-4B Keady’s Concrete acquired 30% of the outstanding common stock of Washburn, Inc.

Price: $2.50


Keady’s Concrete acquired 30% of the outstanding common stock of Washburn, Inc.
on January 1, 2008, by paying $1,600,000 for 60,000 shares.Washburn declared and paid a $0.50
per share cash dividend on June 30 and again on December 31, 2008.Washburn reported net income
of $600,000 for the year. At December 31, 2008, the market price of Washburn’s common
stock was $30 per share.

Instructions
(a) Prepare the journal entries for Keady’s Concrete for 2008 assuming Keady’s cannot exercise
significant influence over Washburn. (Use the cost method and assume Washburn common
stock should be classified as available-for-sale.)
(b) Prepare the journal entries for Keady’s Concrete for 2008, assuming Keady’s can exercise
significant influence over Washburn. (Use the equity method.)
(c) In tabular form, indicate the investment and income account balances at December 31, 2008,
under each method of accounting.