Page 1 of 3 1. On 01/01/2019, Company Big (B) acquired 25% of Company Small (S)'s shares. To acquire the shares, B borrowed $4,000,000 from bank, paid another 1,000,000 cash out of their own bank account, and issued 100,000 shares to the former shareholders of S. The shares issued have $50 market value per share and $1 face value. In 2020, S made a net profit of $4,000,000, announced and gave out 1,000,000 cash dividend. The share price of S were $15 per share at 01/01/2019 and $18 per share at 12/31/2019. Company Big (B) Company Small (S) Acquired 25% of Company Small (S) Profit of 4,000,000 Borrowed 4,000,000 Received 1,000,000 from Company Big Paid 1,000,000 Gave out 1,000,000 Cash Dividend Issues 100,000 Shares to S 01/01/2019 $15 per Share 12/31/2019 $18 per Share Shares Issued 50 @ Market Value Shares $1 Face Value 2. Below are the balance sheets of Big and Small at 01/01/2020 right before Big bought 100% of company Small's shares and make Small its subsidiary. Page 2 of 3 Big Small Book Value Market Value Consolidated Cash 25,000,000 5,000,000 5,000,000 Accounts Receivable 30,000,000 5,000,000 5,000,000 Inventory 50,000,000 7,000,000 7,000,000 Land 100,000,000 10,000,000 20,000,000 PPE 70,000,000 50,000,000 30,000,000 Patent 35,000,000 10,000,000 30,000,000 Missing Asset 12,000,000 Total Asset 310,000,000 87,000,000 97,000,000 Liabilities (150,000,000) (85,000,000) (85,000,000) Common Stock (2,000,000) (300,000) ADPC (78,000,000) (1,000,000) Retained Earnings (80,000,000) (700,000) Total Liabilities and Equity (310,000,000) (87,000,000) Note that Big spent $20,000,000 for 100% shares of company small. PPE at 01/01/2020 had 4 years of useful life left while Patent of Small at 01/01/2020 had 10 years of useful life left. Page 3 of 3 a. What are the journal entries for big to record the investing action. What are the journal entries for Small to record such activities? b. Please fill in the consolidated balance at 01/01/2020. Note that you have to add the account name if some accounts that should appear on the consolidated financial statement are missing c. Assuming that small reports net income in the amount of $800,000, $1,000,000, $1,100,000, $900,000, and $1,200,000 and gives cash dividends in the amount of $100,000, $200,000, $200,000, $300,000 and $300,000, for 2020, 2021, 2022, 2023 and 2024. Please calculate investment income for 2020, 2021 and 2022, 2023 and 2024 respectively and also calculate the balance of the investment account by the end of each year