Equity Method At mid-year, National Steel Fabricators, Inc. purchased a 30% ownership interest in Keystone Consolidated, Inc. for $40 million.

At year-end, Keystone reported an operating loss of $6 million, of which only $2 million related to the second half of the year.

Despite the operating loss, Keystone paid its regular quarterly dividend of $1 million in both the third and fourth quarters.

Required

1. Calculate the income statement effect for National Steel at year-end associated with its investment in Keystone.

$Answer

2. Calculate the book value that National Steel should record on its balance sheet for its investment in Keystone at year-end.

$Answer