Response to the following problem:
Nasdaq, Inc., paid $145,000 for a 40% investment in the common stock of Auto Chief, Inc. For the first year, Auto Chief reported net income of $80,000 and at year-end declared and paid cash dividends of $20,000. On the balance sheet date, the market value of Nasdaq's investment in Auto Chief stock was $134,000.
Required:
1. Which method is appropriate for Nasdaq to use in accounting for its investment in Auto Chief? Why?
2. Show everything that Nasdaq would report for the investment and any investment revenue in its year-end financial statements.
3. What role does the market value of the investment play in this situation?