1. On January 1, 2021, Spring Industries purchased 40% ownership in Harper Corporation for $400,000, allowing Spring to exercise significant control over Harpers operations. As such, Spring accounts for its investment in Harper using the equity method. During 2021, Harper reported net income of $50,000 and declared dividends of $30,000.

On December 31, 2021, Spring should report an Investment in Harper for what amount?

A. 400,000

B. 420,000

C. 408,000

D 480,000

2. In its first year of operations, Johnsonville Industries had the following investments:

Initial Fair Value Dividends Interest Investment Classification Cost @ Year-End Received Earned 8% ownership of East, Inc. Equity (Trading) $10,000 $13,500 $1,000 N/A 15% ownership of Burt, Corp. Equity (AFS) $20,000 $14,100 $2,000 N/A 100 bonds of Brady, Inc. Debt (Trading) $30,000 $31,300 N/A $3,000 200 bonds of Bird, Corp. Debt (AFS) $40,000 $43,800 N/A $4,000

By what amount will these investments increase Johnsonvilles net income for the year?

A. 12,700

B. 2,700

C. 8,900

D 10,000