Fredo, Inc., purchased 10% of Sonny Enterprises for $1,000,000 on January 1, 2021. Sonny recognized a total of $340,000 net income during 2021, paid $24,000 of dividends to Fredo during 2021, and at December 31, 2021, the market value of the Sonny investment increased to $1,034,000. Required: Prepare the journal entries necessary to account for the Sonny investment, assuming that Fredo (1) does not have significant influence or (2) does have significant influence over the operating and financial policies of the investee.

Required 1

1. Record the entry for investment in Sonny Enterprises.

2. Record the revenue from Sonny Enterprise during 2021.

3. Record the entry for cash dividend received.

4. Record the net unrealized holding gain or loss for an available-for-sale investment.

Required 2

1. Record the purchase of Investment in equity affiliate.

2. Record the revenue from Sonny Enterprise during 2021.

3. Record the receipt of dividend during 2021.

4. Record the net unrealized holding gain or loss for an available-for-sale investment.