Learning Objectives

By the end of this section, you will be able to:

• Describe and illustrate the accounting for long-term investments in stocks.
• Explain how and why a business may make investments in stocks of other corporations.
• Prepare journal entries to record investments in stock by the cost method.
• Prepare journal entries to record investments in stock by the equity method.
• Prepare journal entries to record the sale of investments in stocks.
• Explain the reasons for issuing consolidated financial statements.