Mr. Hansens purchase of the stock of LifePath Fitness was done through his business. The stock investment has always been accounted for using the cost method on his firms books. However, early in 2024 he decided to take his company public. He is preparing an IPO (initial public offering), and he needs to have the firms financial statements audited. One of the issues to be resolved is to restate the stock investment in LifePath Fitness using the equity method since Mr. Hansens ownership percentage is greater than 20%.

Instructions

1. (1) Give the entries that would have been made on Hansens books if the equity method of accounting for investments had been used from the initial investment through 2023. Assume the following data for LifePath and that Hansen owns 40% of LifePath starting from January 1, 2021.

		2021		2022		2023
Net income		$30,000		$70,000		$105,000
Total cash dividends		$0		$8,250		$30,000

1. (2) Compute the balance in the Stock Investments account (as it relates to LifePath Fitness) at the end of 2023.