Oaktree Financial Inc. paid $500,000 for a 25% investment in the common shares of eTrav Inc. For the first year, eTrav reported net income of $200,000 and at year-end declared and paid cash dividends of $100,000. On the balance sheet date, the fair value of Oaktree's investment in eTrav shares was $384,000.

Requirements

1. Which method is appropriate for Oaktree Financial to use in accounting for its investment in eTrav? Why?

2. Show everything that Oaktree would report for the investment and any investment revenue in its year-end financial statements.