MNO Corp. purchased 22 percent of EFG Company's voting stock on January 1, 2015, for £2.8 million in cash. At the date of acquisition, EFG reported its total assets at £55 million and its total liabilities at £50 million. Investigation revealed that EFG's machinery (15-year life) was overvalued by £1.6 million and it had an unreported customer base (5-year life) valued at £600,000. EFG declares and pays £100,000 in dividends and reports net income of £270,000 in 2021.

Required: Prepare the necessary journal entries on MNO's books to report the above information for 2021 assuming MNO uses the equity method to report its investment.