At a total cost of $6,300,000, Veravo Corporation acquired 210,000 shares of Strado Corp. common stock as a long-term investment. Veravo Corporation uses the equity method of accounting for this investment. Strado Corp. has 700,000 shares of common stock outstanding, including the shares acquired by Veravo Corporation.

Required:

A.

Journalize the entries by Veravo Corporation on December 31 to record the following information (refer to the Chart of Accounts for exact wording of account titles):

1.	Strado Corp. reports net income of $860,000 for the current period.
2.	A cash dividend of $0.32 per common share is paid by Strado Corp. during the current period.

B.

Why is the equity method appropriate for the Strado Corp. investment?

B. Why is the equity method appropriate for the Strado Corp. investment?

Veravos investment in Strado Corp. represents ? of the outstanding shares of Strado Corp. An investment amount between ? and ? of the outstanding common stock of the investee is presumed to represent significant influence. The equity method is ? when the investor can exercise significant influence over the investee.