Journal entries to apply the equity method of accounting for investments in securities. The following information summarizes data about the minority, active investments of Stebbins Corporation.

Company R has a building with a market value in excess of its book value of \(\$ 40,000\). The building has a 10 -year remaining life. The market values of the recorded net assets of Company \(\mathrm{S}\) and Company \(\mathrm{T}\) equal their book values. The firm neither amortizes any goodwill nor finds it impaired.

a. Give the journal entries to record the acquisition of these investments and to apply the equity method during Year 1 and Year 2.

b. Stebbins Corporation sells Security R on January 1, Year 3, for \(\$ 275,000\). Give the journal entry to record the sale.

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Book Value of Earnings (Loss) Security Date Acquired Acquisition Ownership Cost Percentage Net Assets on January 1, Year 1 Year 1 Year 2 Year 1 RS R 1/1/Year 1 $250,000 25% $800,000 $200,000 $225,000 1/1/Year 1 325,000 40 750,000 120,000 75,000 Dividends $125,000 80,000 Year 2 $130,000 80,000 T 1/1/Year 1 475,000 50 950,000 (150,000) 50,000 - -