Question 3 (10 points) 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) Record the necessary journal entries based on the information provided.

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