1. On January 1, 2014, Palsoe Corp. acquired 30 percent (13,000 shares) of Nostay Services Inc. common stock for $1,300,000 as a long-term investment. Data from Nostay's 2014 financial statements include the following: Net income ............................................ $330,000 Less cash dividends paid .............................. 160,000 Increase in retained earnings ......................... $170,000 The market value of Nostay Services Inc. common stock on December 31, 2014, was $98 per share. Palsoe does not have any other noncurrent investments in securities. Prepare the necessary journal entries for Palsoe's investment in Nostay Services Inc. common stock under (1) the cost method classified as available-for-sale securities. (2) the equity method. 2. On February 1, 2014, Andover Inc. had excess cash on hand. The controller suggested to management that the company buy $300,000 of U.S. Treasury bonds selling at 102 and paying 8 percent interest. Interest payments on these bonds are made semiannually on January 1 and July 1. (1) Prepare entries to record the February purchase of U.S. Treasury bonds and the subsequent collection of interest on July 1, using (a) the asset approach. (b) the revenue approach. 3. On January 2, 2014, the Clapton Studios leased six computers for use in the engineering department. The lease period is for 13 years and the estimated economic life of the leased property is 15 years. The lease does not contain automatic title transfer or a bargain purchase option. Lease payments are $11,000 per year, payable each December 31. The implicit interest rate (known by Clapton) is 10 percent. The company uses straight-line depreciation for this type of equipment. Provide the necessary journal entries to record the transactions for Clapton for the period January 2, 2014 through December 31, 2015. 4. Jefferson Financing, Inc. purchased a packing machine to lease to Puyallup Fruits. The lease qualifies as a direct financing lease and requires lease payments of $58,860 per year, payable in advance, over a ten-year period. There is no expected residual value. The fair market value of the packing machine is $330,000--the same amount paid by Jefferson to purchase the asset. The lease term begins on January 1, 2014. Provide the journal entries required on Jefferson's books to (1) record the lease transaction and the first lease payment. (2) recognize interest revenue at the end of the first year. Jefferson uses a calendar-year accounting period. (Round all computations to the nearest dollar.)