On July 1, 2013, Killearn Company acquired 80,000 of the outstanding shares of Shaun Company for $12 per share. This acquisition gave Killearn a 25 percent ownership of Shaun and allowed Killearn to significantly influence the investees decisions.

As of July 1, 2013, the investee had assets with a book value of $3 million and liabilities of $938,000. At the time, Shaun held equipment appraised at $350,000 above book value; it was considered to have a seven-year remaining life with no salvage value. Shaun also held a copyright with a five-year remaining life on its books that was undervalued by $1,160,000. Any remaining excess cost was attributable to goodwill. Depreciation and amortization are computed using the straight-line method. Killearn applies the equity method for its investment in Shaun.

Shauns policy is to declare and pay a $1 per share cash dividend every April 1 and October 1. Shauns income, earned evenly throughout each year, was $585,000 in 2013, $617,600 in 2014, and $663,600 in 2015.

In addition, Killearn sold inventory costing $144,600 to Shaun for $241,000 during 2014. Shaun resold $85,500 of this inventory during 2014 and the remaining $155,500 during 2015.

a. Determine the equity income to be recognized by Killearn during each of these years:

2013

2014

2015

b. Compute Killearn's investment in Shaun Company's balance as of December 31, 2015.