Change in Reporting for Equity Investment

Stream Company buys 10 percent of Topsia Companys stock for $2 million in cash on January 1, 2020, and reports the investment as having no significant influence. Fair value of the investment on December 31, 2020 is $2.1 million. On January 1, 2021, Stream acquires another 30 percent of Topsias stock for $8 million in cash, and changes to the equity method of reporting for this investment. Fair value of the 40 percent interest on December 31, 2021, is $12 million. Topsia reported the following amounts for the years 2020 and 2021:

	2020	2021
Net income	$300,000	$400,000
Cash dividends (paid at year-end)	200,000	300,000

Topsia reported no other comprehensive income, and any basis difference is attributed to goodwill. Stream and Topsia have no intercompany transactions.

Required

Calculate the balances appearing in the following accounts of Stream Company for 2020 and 2021:

a. Investment in Topsia, reported on Streams December 31, 2020 and December 31, 2021 balance sheets.

b. Dividend income reported on Streams income statements, 2020 and 2021.

c. Unrealized gain on investment in Topsia, reported on Streams 2020 and 2021 income statements.

d. Equity in net income of Topsia, reported on Streams 2020 and 2021 income statements.

Account	2020	2021
Investment in Topsia	$Answer	$Answer
Dividend income	Answer	Answer
Unrealized gain on investment	Answer	Answer
Equity in net income of Topsia	Answer	Answer