P Corp. paid $$500,000$ for a $40\%$ interest in S Limited on January $1,$ Year $6.$ This purchase gives P significant influence in S$.$

During Year $6,$ S paid dividends of $$100,000$ and reported profit as follows:

Profit before discontinued operations $$385,000$

Discontinued Operations loss $($net of tax$)(30,000)$

OCI $($unrealized gain on FV$-$OCI investment$)20,000$

Comprehensive Income $$375,000$

P$\text{'}$s profit for Year $6$ consisted of $$1,200,000$ in sales, operating expenses of $$500,000,$ income tax expense of $$210,000,$ and its investment income from S$.$ Both companies have an income tax rate of $30\%.$

Required:

$($a$)$ Assume that P reports its investment using the equity method.

Prepare all journal entries necessary to account for P$\text{'}$s investment for Year $6.(4$ marks$)$

Determine the correct balance in P$\text{'}$s investment account at December $31,$ Year $6.(2$ marks$)$

Prepare a statement of comprehensive income for P for Year $6.$ Use an appropriate $3-$line title. $(4$ marks$)$

$($b$)$ Assume that P uses the cost method.

Prepare all journal entries necessary to account for P$\text{'}$s investment for Year $6.(2$ marks$)$

Determine the correct balance in P$\text{'}$s investment account at December $31,$ Year $6.(1$ mark$)$

Prepare an income statement for P for Year $6.$ Use an appropriate $3-$line title. $(3$ marks$)$

$($c$)$ If P wants to show the lowest debt$-$to$-$equity ratio at the end of year $6,$ would it prefer to use the cost or equity method to report its investment in S