ABC Corporation purchased 30 percent of XYZ Company's voting stock on January 1, 2014, for £4 million in cash. At the date of acquisition, XYZ reported its total assets at £80 million and its total liabilities at £72 million. Investigation revealed that XYZ's plant and equipment (10-year life) was overvalued by £2.2 million and it had an unreported patent (3-year life) valued at £700,000. XYZ declares and pays £120,000 in dividends and reports net income of £300,000 in 2021.

Required: Prepare the necessary journal entries on ABC's books to report the above information for 2021 assuming ABC uses the equity method to report its investment.