At December 31, 2019, Fright Limited (Fright) owned 75,000 common shares of Scare Company (Scare) when the shareholders equity of Scare was as follows:

Common shares (100,000 no par value shares issued and outstanding)	$ 4,000,000
Retained earnings	2,600,000
	$6,600,000

The unamortized acquisition differential at December 31, 2019, was as follows:

Trademarks net (remaining useful life of 15 years)	$135,000
Goodwill	380,000
	$515,000

On January 1, 2020, Fright sold 15,000 common shares of Scare to an unrelated party for $720,000. Scares statement of retained earnings for 2020 was as follows:

Retained earnings, January 1, 2020	$ 2,600,000
Net income	1,800,000
Dividends	(400,000)
Retained earnings, December 31, 2020	$ 4,000,000

On January 1, 2021, Fright sold 18,000 common shares of Scare to an unrelated party for proceeds of $1,728,000.

Additional Information

• Fright uses the equity method to record its investment in Scare for its separate entity financial statements.
• There was no impairment of goodwill in 2019 or 2020.
• There were no unrealized profits from intercompany transactions since the date of acquisition.

Link to Excel spreadsheet: Decrease in Ownership.xlsx

REQUIRED: (19 MARKS)

1. Calculate the balance in the Investment in Scare account as at December 31, 2019. (3 marks)
2. Prepare all relevant journal entries relating to Frights investment in Scare for 2020. (6 marks)
3. Calculate the balance in Investment in Scare account as at December 31, 2020. (4 marks)
4. Prepare the journal entries to record the sale and revaluation of the common shares on January 1, 2021. (6 marks)