On 3 January 20X5, London Company entered into a joint arrangement with two other investors to develop a gold mine called JDX Gold. Based on the contractual arrangement, London will have rights to the net assets and net income of JDX Gold. London has a 25% interest in JDX Gold. On January 3, 20X5, London contributed $2,500,000 to JDX. Both London and JDX have a December 31 year-end. At 31 December 20X5, JDX reported a net loss of $400,000 and no dividends were declared. For the 20X6 fiscal year-end, JDX reported a net income of $625,000 and dividends of $200,000 were paid.

Required:

1. What type of joint arrangement is this and what is the appropriate accounting method used for this investment?

2. Prepare 20X5 and 20X6 journal entries for London.

3. At the end of 20X5 and 20X6, what is the balance in the investment account? What investment revenue is reported on the Statement of Comprehensive Income (SCI)?