On 1/1/21, Liu Company purchased 5,000 of the 100.000 outstanding shares of Bao Company's common stock for $20 a share. During the year, Bao Company paid total dividends of $6,000 out of its net income of $30,000. On 12/31/2021, Bao Company's stock was trading at $17 per share. Round to the nearest dollar.

Assume Liu accounts for this equity investment in Bao Company as a passive investment.

1. How much will the investment be reported at on Liu Company's 12/31/2021 balance sheet? Explain why its recorded at this amount.

2. How much will Liu Company's net income increase/decrease by from all the transactions during 2021 related to this investment?

3. Record the journal entry for dividends for Liu Company.