On January 4, 2014, Penman Company purchased 124,000 shares of Hi Energy Company directly from one of the founders for a price of $44 per share. Hi Energy has 400,000 shares outstanding, including the Penman shares. On July 2, 2014, Hi Energy paid $440,000 in total dividends to its shareholders. On December 31, 2014, Hi Energy reported a net income of $800,000 for the year. Penman uses the equity method in accounting for its investment in Hi Energy.
a. Provide the Penman Inc. journal entries for the transactions involving its investment in Hi Energy Inc. during 2014.
b. Determine the December 31, 2014, balance of the Investment in Hi Energy Company. Stock account.