Red purchased 10% of blue on January 1, 2019 for $320,000 in cash and did not have the ability to exercise significant influence. During 2019 blue paid $125,000 in dividends and reported income of $600,000. On December 31, 2019 the market value of red investment in blue climbed to $375,000.

a. journalize all necessary entries on the book of read assuming available for sale securities using the fair value method in 2019.

b. Assume instead that red purchase 25% of the shares on January 1, 2019 for $700,000 which is $50,000 greater than 25% of blues book value the excess is to be amortized over 10 years. Record the activity for 2019 using the equity method.