On January 1 of Year 1, Davis Company purchased 4,000 shares of the 10,000 outstanding shares of Company B for a total of $65,000. At the time of the purchase, the book value of Company B’s equity was $120,000. Any excess of investment purchase price over the book value of Company B’s equity is attributable to a building owned by Company B. The building has a remaining useful life of 20 years. Company B’s net income in Year 1 was $40,000. Dividends per share paid by Company B were $1.10 in Year 1.

(1) Make all journal entries necessary on Davis’s books to record its investment in Company B in Year 1.

(2) Compute the Year 1 ending balance in Davis Company’s Investment in Company B account.