On January 2, 2018, Hadley Inc. purchased shares of Letourneau Cycles Corp. for $10 per share. Hadley intends to hold these shares as a long-term investment. During 2018, Letourneau Cycles reported net income of $1 million and declared and paid dividends of $200,000. The investment's fair value at December 31, 2018, was $950,000.

Hadley's accountant prepared a trial balance at December 31, 2018, under the assumption that Hadley should use the equity method because it could exercise significant influence over Letourneau Cycles. Under this assumption, the trial balance included the following accounts and amounts:

Investment in associates..............................$960,000

Income from associates.................................200,000

Instructions

(a) What percentage of the Letourneau Cycles shares does Hadley own? (Hint: The ownership percentage can be determined using the investment revenue and Letourneau's net income.)

(b) What was the amount of the cash dividend that Hadley received from Letourneau Cycles during 2018?

(c) How many shares of Letourneau Cycles did Hadley purchase on January 2?

(d) What questions need to be asked to determine if Hadley has significant influence over Letourneau Cycles?

(e) Assume that, after closely examining the situation, Hadley's auditors determine that it does not have significant influence over Letourneau Cycles. What amount should be reported on Hadley's statement of financial position at December 31 for its investment in Letourneau Cycles, assuming that the fair value through profit or loss model was used? What will be reported on Hadley's income statement for 2018?

(f) How would your answer to part P12.8B(e) change if Hadley reported under ASPE and chose to use the cost model when accounting for its investment in Letourneau assuming that the shares did not trade in an active market?