The accounts of Pyle Company and its subsidiary, Stern Company, are summarized below as of December 31, 2024:

The book value of Stern Company’s net assets on January 2, 2022, $600,000, approximated the fair value of those net assets, including retained earnings of $120,000. Subsequent changes in book value of the net assets are entirely attributable to earnings of Stern Company. Stern Company earns its income evenly throughout the year.

Required:
Prepare the journal entries needed on Pyle Company’s books to record the transactions regarding the investment in Stern Company account assuming that the cost method is used to account for the investment.

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Debits Current Assets Investment in Stern Company Other Assets Dividends Declared, 11/1 Credits Liabilities Common Stock, $5 par Other Contributed Capital 1/1 Retained Earnings Net Income Pyle $600,000 480,000 1,180,000 80,000 $2,340,000 $190,000 500,000 230,000 1,200,000 220,000 $2,340,000 Stern $320,000 668,000 60,000 $1,048,000 $ 90,000 300,000 180,000 292,000 186,000 $1,048,000 Pyle Company made the following open-market purchase and sale of Stern Company common stock: January 2, 2022, purchased 51,000 shares (85% of Stern), cost $510,000, $10/share. January 1, 2024, sold 40,000 shares (two-thirds of Stern), proceeds, $480,000, $12/share.