Provide analysis of the accounting issues described below. Company A reports its financial statements in accordance with accounting standards for private enterprises (ASPE).

On February 1, 2020, Company A paid $400,000 for a 25% interest in the common shares of Hinge Buddy Inc. (HBI). HBI is one of Company A's main suppliers of kitchen hardware. Company A's board was very keen to acquire HBI shares as it was viewed as a "wise strategic move." The CFO and sales manager for Company A have been appointed to the board of directors of HBI. The remaining HBI shares are held by the founder and president of HBI. The journal entry recorded related to this acquisition was:

Investment in HBI 400,000

Cash 400,000

HBI has a December 31 year end and reported net income of $1,400,000 for 2020, which is its typical profit level. Company A is not sure if this investment is being accounted for appropriately. Company A would like to account for the investment in a way that makes their financial statements "look good."