$($Fair Value to Equity Method with Goodwill$)$ On January $1,2025,$ Millay Inc.

paid $$700,000$ for $10,000$ shares of Genso Company$$s voting common stock, which was a $10\%$ interest in

Genso. Millay does not have the ability to exercise significant influence over the operating and financial

policies of Genso. Millay received dividends of $$1\mathrm{.}50$ per share from Genso on October $1,2025.$ Genso

reported net income of $$550,000$ for the year ended December $31,2025.$ The cost and fair value of

Genso common stock was the same at December $31,2025.$

On July $1,2026,$ Millay paid $$2,325,000$ for $30,000$ additional shares of Genso Company$$s voting

common stock, which represents an additional $30\%$ investment in Genso. As a result of this transaction, Millay has the ability to exercise significant influence over the operating and financial policies of

Genso. Millay received dividends of $$2\mathrm{.}00$ per share from Genso on April $1,2026,$ and $$2\mathrm{.}50$ per share

on October $1,2026.$ Genso reported net income of $$650,000$ for the year ended December $31,2026,$ and

$$350,000$ for the $6$ months ended December $31,2026.$

Instructions

$($For both purchases, assume any excess of cost over book value is due to goodwill.$)$

a$.$ Prepare a schedule showing the income or loss before income taxes for the year ended December

$31,2025,$ that Millay should report from its investment in Genso in its income statement issued in

March $2026.$

b$.$ During March $2027,$ Millay issues comparative financial statements for $2025$ and $2026.$ Prepare

schedules showing the income or loss before income taxes for the years ended December $31,2025$

and $2026,$ that Millay should report from its investment in Genso