Chen Inc. acquired 20% of the outstanding ordinary shares of Cho Corp. on December 31, 2015. The purchase price was ¥125,000,000 for 50,000 shares.

Cho Corp. declared and paid an ¥80 per share cash dividend on June 30 and on December 31, 2016. Cho reported net income of ¥73,000,000 for 2016. The fair value of Cho’s shares was ¥2,700 per share at December 31, 2016.

Instructions

(a) Prepare the journal entries for Chen Inc. for 2015 and 2016, assuming that Chen cannot exercise significant influence over Cho. The investments should be classified as trading.

(b) Prepare the journal entries for Chen Inc. for 2015 and 2016, assuming that Chen can exercise significant influence over Cho.

(c) At what amount is the investment reported on the statement of financial position under each of these methods at December 31, 2016? What is the total net income reported in 2016 under each of these methods?