On January 1 of Year 1, Mussy Inc. acquired 80% of News Company's outstanding common shares for $800,000. The book value and fair market value of the net assets purchased are equal. Mussy has significant influence over News as no other shareholder owns more than 2% of the company. On December 31 of Year 1 News reported net income of $1,000,000. Also, on December 31 News paid cash dividends to all shareholders totalling $400,000. 

 

Required

(1) Prepare the journal entries to record the original purchase, earnings in News, and receipt of cash dividends. 

(2) How should Mussy present its investment in News on its balance sheet as of December 31 (what line item and at what value)?