On January 1, 2012, Palka, Inc., acquired 70 percent of the outstanding shares of Sellinger Company for $1,649,200 in cash. The price paid was proportionate to Sellingers total fair value, although at the acquisition date, Sellinger had a total book value of $2,100,000. All assets acquired and liabilities assumed had fair values equal to book values except for a patent (six-year remaining life) that was undervalued on Sellingers accounting records by $246,000. On January 1, 2013, Palka acquired an additional 25 percent common stock equity interest in Sellinger Company for $586,250 in cash. On its internal records, Palka uses the equity method to account for its shares of Sellinger.

During the two years following the acquisition, Sellinger reported the following net income and dividends:

	2012	2013
Net income	$ 350,000	$ 515,000
Dividends	180,000	220,000

a.	Show Palkas journal entry to record its January 1, 2013, acquisition of an additional 25 percent ownership of Sellinger Company shares.

b.	Prepare a schedule showing Palkas December 31, 2013, equity method balance for its Investment in Sellinger account. (Amounts to be deducted should be indicated with a minus sign.)

Initial value for acquisition	$
Adjusted subsidiary income 2012
Subsidiary dividends 2012
Adjusted fair value of newly acquired shares
Adjusted subsidiary 2013 income
Subsidiary dividends 2013
Investment in Sellinger 12/31/13	$