Lovell Corporation purchased 200,000 of the 1 million common shares of Abacus Ltd. on October 1, 2015, at $2.50 per share. Near the end of the fourth quarter, Abacus declared and paid dividends on its common shares of $80,000. Lovell received its share of the dividends on December 29. Abacus also announced that it had profit for the quarter ending December 31, 2015, of $200,000.

Instructions

Record the journal entries that Lovell would make during the last quarter ending December 31, 2015, under the following assumptions:

(a) Lowell has significant influence over Abacus and uses the equity method to account for this investment.

(b) Lowell does not have significant influence over Abacus and uses the cost model to account for this investment?