On March 28, 2020, Kermit Inc. purchased 45,000 shares of Bonobo Inc. for $15 per share. Bonobo has 100,000 shares outstanding. On December 1, Kermit received an $0.35 cash dividend per share. On December 31, 2020, Bonobo reported net income of $450,000. At this date, the market price of Bonobo stock is selling for $12 per share. On December 1, 2021, Kermit received a total of $10,000 of cash dividends from Bonobo. On December 31, 2021, Bonobo reported a net loss of $20,000 and the market price is selling for $6 per share on this date. On this date, Kermit sold all of the Bonobo stock for $6 per share.

Instructions :

(1) Briefly explain, in words, how the accounting treatment for debt investments differs compared with the accounting treatment for equity investments.