Elias, Inc. owns a 90% interest in ABCs Co. At the beginning of the year, the Equity Investment was carried on Elias balance sheet at $1,775,000, there was a patent recorded in the acquisition for $300,000 that has a 10 year service life and equipment was undervalued by $500,000 with a 20 year service life. During 2019, ABCs reported net income of $415,500 and in 2020 they recorded income of $465,700 and paid Elias total dividends of $75,000 both years.

1. How much income will Elias record as Equity Income for each year?

2. Prepare the equity method journal entries to record the total equity income and the receipt of dividends for each year.

3. Determine the balance in the Equity Investment at the end of 2020 using this T Account