THE EQUITY METHOD

Delta Apparatus bought $40\%$ of Clay Crating Corp.$\text{'}$s outstanding common shares on

January $2,2024,$ for $$540$ million. The carrying amount of Clay Crating's net assets

$($shareholders$\text{'}$ equity$)$ at the purchase date totaled $$900$ million. Book values and fair

values were the same for all financial statement items except for inventory and buildings,

for which fair values exceeded book values by $$25$ million and $$225$ million, respectively.

All inventory on hand at the acquisition date was sold during $2024.$ The buildings have

average remaining useful lives of $18$ years. During $2024,$ Clay Crating reported net income

of $$220$ million and paid an $$80$ million cash dividend.

Required:

Prepare the appropriate journal entries during $2024$ for the investment.

Determine the amounts relating to the investment that Delta Apparatus should report in

the $2024$ financial statements

a$.$ as an investment in the balance sheet.

b$.$ as investment revenue in the income statement.

c$.$ as investing and$/$or operating activities in the statement of cash flows $($direct method$).$