EX $15-10$ Equity method for stock investment

At a total cost of $$5,600,000,$ Herrera Corporation acquired $280,000$ shares of Tran Corp.

accounting for inis invesiment. I ran corp. has ouv,uuU snares ol commoni stock oulsianaing, including the shares acquired by Herrera Corporation.

a$.$ Journalize the entries by Herrera Corporation to record the following information:

Tran Corp. reports net income of $$600,000$ for the current period.

A cash dividend of $$0\mathrm{.}50$ per common share is paid by Tran Corp. during the current period.

b$.$ Why is the equity method appropriate for the Tran Corp. investment?