On January 1, 2024, Studio27 Ltd., a private company, buys 25% of Sugar Maple Candy Company’s 200,000 common shares for $480,000. On December 31, 2024, Sugar Maple pays a $35,000 cash dividend and reports profit of $280,000. At December 31, 2024, Sugar Maple’s shares are trading at $12.50 per share. Both companies have a December 31 year end. Studio27 is able to appoint one board member to Sugar Maple’s board of directors and this person has been influential in directing the operations of the company.

Instructions 

a. Record the above transactions assuming Studio27 uses the equity method to report its investment in Sugar Maple Candy Company. 

b. Determine the amounts to be reported on Studio27’s balance sheet and income statement for its investment in Sugar Maple at December 31, 2024. 

c. Repeat parts (a) and (b) assuming Studio27 elects to use the cost method for significant influence investments.