1.) Equity Method for Stock Investment

On January 4, 20Y6, Spandella Company purchased 175,000 shares of Filington Company directly from one of the founders for a price of $30 per share. Filington has 500,000 shares outstanding, including the Spandella shares. On July 2, 20Y6, Filington paid $620,000 in total dividends to its shareholders. On December 31, 20Y6, Filington reported a net income of $1,050,000 for the year. Spandella uses the equity method in accounting for its investment in Filington.

a. Journalize the Spandella Inc. entries for the transactions involving its investment in Filington Company during 20Y6.

b. Determine the December 31, 20Y6, balance of the investment in Filington Company stock account:

$_______

2.) Equity Method

On January 2, Yorkshire Company acquired 40% of the outstanding stock of Fain Company for $500,000. For the year ended December 31, Fain earned income of $140,000 and paid dividends of $50,000.

Journalize the entries for Yorkshire Company for the purchase of the stock, the share of Fain income, and the dividends received from Fain Company.

2016 Jan. 4 2014 July 2 20Y6 Dec. 31 Jan. 2 - Purchase Dec. 31 - Income Dec. 31 - Dividends