On April 30 20X4 Large Inc established a subsidiary known
On April 30, 20X4, Large Inc. established a subsidiary known as Small Inc. Large invested $ 500,000 in the shares of Small. Small has no other shares outstanding. Since its establishment, small has had the following earnings and paid the following dividends:

a) Determine the amount of Small Inc.’ s earnings that will be reported as investment income by Large Inc. in 20X7, under the equity method.
b) Calculate the balance of the investment in Small Inc. account on Large Inc.’ s books at December 31, 20X7, assuming that Large Inc. maintains the investment account on the equitybasis.
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