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'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 journal entries necessary to account for P's investment for Year 6. (3 marks)
• Determine the correct balance in P's investment account at December 31, Year 6. (3 marks)