Entries for equity investments: $20\%-50\%$ ownership

At a total cost of $$645,000,$ Herrera Corporation acquired $50,000$ shares of Tran Corp. common stock as a long$-$term investment. Tran Corp. has $200,000$ shares of common stock outstanding, Including the shares acquired by Herrera Corporation.

a$.$ Journalize the entries by Herrera Corporation to record the following information: If an amount box does not require an entry, leave it blank.

Tran Corp. reports net income of $$1,160,000$ for the current period. $$

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A cash dividend of $$1\mathrm{.}00$ per common share is paid by Tran Corp. during the current period.

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b$.$ Why is the equity method appropriate for the Tran Corp. investment?

An investment amount $$ of the outstanding common stock of the investee is presumed to represent significant influence. The equity method is appropriate when the investor $$ exercise significant influence over the investee.