On January 1, 2017, Fletwode Corp. (Fletwode) purchased 2,250,000 common shares of Irvine Ltd. (Irvine) for $10,000,000. The investment represents a 30 percent interest in Irvine and gives Fletwode significant influence over Irvine. For 2017, Fletwode's share of Irvine's net income was $390,000, and during the year Irvine paid dividends of $100,000 to all shareholders. Both companies have December 31 year-ends.
a. Prepare Fletwode's journal entry to record its investment in Irvine.
b. What amount would be reported on Fletwode's December 31, 2017 balance sheet for this investment? How much would Fletwode report on its December 31, 2017 income statement from its investment in Irvine?