ShayCorporation owns equity-method investments in several companies. Shay paid $1,600,000 toacquire a 25% investment in Faulk Software Company. Faulk reported net income of $620,000for the first year and declared and paid cash dividends of $480,000.Requirements1. Record the following in Shay’s journal: (a) the purchase of the investment, (b) Shay’s proportion of Faulk’s net income, and (c) the receipt of the cash dividends.2. What is the ending balance in Shay’s investment account?

Question

Shay
Corporation owns equity-method investments in several companies. Shay paid $1,600,000 to
acquire a 25% investment in Faulk Software Company. Faulk reported net income of $620,000
for the first year and declared and paid cash dividends of $480,000.
Requirements
1. Record the following in Shay’s journal: (a) the purchase of the investment, (b) Shay’s proportion of Faulk’s net income, and (c) the receipt of the cash dividends.
2. What is the ending balance in Shay’s investment account?

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