On January 1, 20X0, Hunter Corporation issued 6,000 of its \(\$ 10\) par value shares to acquire 45 percent of the shares of Arrow Manufacturing. The balance sheet of Arrow Manufacturing immediately before the acquisition contained the following items:

On the date of the stock acquisition, Hunter Corporation shares were selling at \(\$ 35\), and the buildings and equipment of Arrow Manufacturing had a remaining economic life of 10 years. The amount of the differential assigned to goodwill is not amortized.
In the two years following the stock acquisition. Arrow Manufacturing reported net income of \(\$ 80,000\) and \(\$ 50,000\) and paid dividends of \(\$ 20,000\) and \(\$ 40,000\), respectively. Hunter Corporation used the equity method in accounting for its ownership of Arrow Manufacturing.
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a. Give the entry recorded by Hunter Corporation at the time of acquisition.

b. Give the journal entries recorded by Hunter during 20X0 and 20X1 related to its investment in Arrow Manufacturing.

c. What balance will be reported in the investment account of Hunter on December 31, 20X1 ?

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ARROW MANUFACTURING Balance Sheet January 1, 20X0 Assets Cash and Receivables Land Buildings and Equipment (net) Patent Total Assets Liabilities and Equities Accounts Payable Common Stock Retained Earnings Total Liabilities and Equities Book Value Fair Value $ 30,000 $ 30.000 70,000 120,000 80.000 80,000 150,000 80,000 $300,000 $ 90,000 90.000 150.000 60.000 $300.000