Chen Group acquired 20% of the outstanding ordinary shares of Cho Ltd. on December 31, 2022. The purchase price was ¥125,000,000 for 50,000 shares. Cho declared and paid an ¥80 per share cash dividend on June 30 and on December 31, 2023. Cho reported net income of ¥73,000,000 for 2023. The fair value of Cho’s shares was ¥2,700 per share at December 31, 2023.

Instructions

a. Prepare the journal entries for Chen for 2022 and 2023, assuming that Chen cannot exercise significant influence over Cho. The investments should be classified as trading.

b. Prepare the journal entries for Chen for 2022 and 2023, assuming that Chen can exercise significant influence over Cho.

c. At what amount is the investment reported on the statement of financial position under each of these methods at December 31, 2023? What is the effect on net income reported in 2023 under each of these methods?