On January 3, 2016, Austin Corp. purchased 25% of the voting common stock of Gainsville Co., paying $2,500,000. Austin decided to use the equity method to account for this investment. At the time of this investment, Gainsville's stockholder's equity was $8,000,000. Austin gathered the following information about Gainsville's assets and liabilities:

Equipment (5 year life) had a book value of $1,200,000 and a fair value of 2,000,000

For all other assets and liabilities, book value and fair value were equal. During 2016, Gainsville had a net loss of $3,000,000 and paid dividends of $1,600,000.

Assume that the investment did not give Austin the ability to significantly influence Gainsville.

1. Compute Austins income from its investment in Gainsville in 2016?

2. Make the necessary entries for 2016?