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1. (26 points) On 01/01/2014, Company Big (B) acquired 25% of Company Small (S)'s shares. To acquire the shares. B borrowed S 4,000,000 from bank,

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1. (26 points) On 01/01/2014, Company Big (B) acquired 25% of Company Small (S)'s shares. To acquire the shares. B borrowed S 4,000,000 from bank, paid another 1,000,000 cash out of their own bank account, and issued 100,000 shares to the former shareholders of S. The shares issued have S50 market value per share and SI face value. In 2015, S made a net profit of $4,000,000, announced and gave out 1,000,000 cash dividend. The share price of S were S15 per share at 01/01/2014 and S18 per share at 12/31/2014 a. For the transaction happened on 01/01/2014, please write down the journal entries for B (5 points) b. For the transaction happened on 01/01/2014, please write down the journal entries for S (5 points) c. Assuming that B has no significant influence over S, what accounting method should B use to document their investment? And what are the journal entries that are related to the investment and investing activities during 2014 for B, in other words, what is the balance of investment account at the end of 2014 for B? And what are the journal entries to document the changes irn investment account? (8 points)

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