Garrison acquires 40 percent of the outstanding voting stock of Larson Company on January 1, 2020, for $530,000 in cash. The book value of Larson's net assets on that date was $1,000,000, although one piece of the company's equipment, with a $100,000 carrying (book) amount, was worth only $60,000. This piece of equipment had an 8-year remaining life. In addition, Larson owned a franchise agreement with a 10-year remaining life that was undervalued by $80,000 (i.e., the market value was $80,000 higher than its book value).

Larson reported a $125,000 net income in 2020. The company managed to declare and pay a $20,000 cash dividend during the year.

Larson sold inventory with an original cost of $90,000 to Garrison during 2020 at a transfer price of $120,000. Garrison still held $25,000 of the transfer price in inventory as of December 31, 2020. These goods were to be sold to outside parties during 2021.

During 2021, Larson reported a $20,000 net loss and a $32,000 other comprehensive loss. It made additional inventory sales with a transfer price of $80,000 to Garrison during the period. The original cost of the merchandise was $55,000. All but 30 percent of this inventory had been resold to outside parties by the end of 2021.

1. Garrison uses the equity method to record all investment-related entries. Prepare all journal entries for Garrison for 2020 and 2021 in connection with this investment. Provide supporting calculations as needed to get credit.
2. Determine the balance of Investment in Larson as of December 31, 2020 and December 31, 2021. Show the posting entries to the Investment t-account.
3. Determine the total Equity Income in Larson for 2020 and 2021. Show calculations.