On January 2, 2013, Potter Ltd. purchased 40% Santiago Ltd. for $900,000. At the acquisition date, Santiago's balance sheet showed total shareholders' equity of $1,500,000. Any acquisition differential is to be allocated to Santiago's equipment. At the acquisition date, the equipment had a remaining useful life of 10 years. For the past 5 years, Santiago has paid annual dividends of $50,000 and will continue to do so in the future.
The following information has been extracted from Santiago's income statement:

Required:
Assume that Potter has significant influence. Prepare Potter's journal entries related to its investment in Santiago for 2013 and 2014.

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1013 $(90,000) S450,000 2014 Net income (loss) before extraordinary items Extraordinary gain (net of tax) Net income (loss) 150,000 S (90,000) S600,000