On January $1,2022,$ Wayne Corporation acquired $55,000$ common shares of Garth Company for $$30$ each. At the time, Garth had $687,500$ common shares outstanding. The investment was classified as FV$-$NI$.$ During $2022,$ Garth reported net income of $$800,000$ and did not declare or pay dividends. At the end of $2022,$ the fair value of Garth$$s shares was $$35$ per share.

REQUIRED:

a$)$ Prepare Wayne Corporation$$s journal entries for the investment in Garth for the $2022$ fiscal year. $(2$ Marks$)$

On January $1,2023,$ Wayne Corporation acquired another $151,250$ common shares of Garth Company for $$35$ each. The book values of Garth$$s net assets were equal to fair values except for specialized equipment, which was understated by $$48,000.$ The equipment had an estimated remaining life of $8$ years. During $2023,$ Garth reported net income of $$730,000$ and paid dividends of $$200,000.$ At December $31,2023,$ the fair value of Garth$$s shares was $$43$ per share.

REQUIRED:

b$)$ Prepare the journal entries on the books of Wayne Corporation for the investment in Garth for the $2023$ fiscal year. $(4$ Marks$)$

On January $1,2024,$ Wayne Corporation acquired another $82,500$ common shares of Garth Company for $$43$ per share. The book values of Garth$$s net assets were equal to fair values except for specialized equipment, which was now understated by $$42,000$ and had an estimated remaining useful life of $7$ years. During $2024,$ Garth Company reported a net income of $$1,100,000$ and paid dividends of $$320,000.$ At December $31,2024,$ the fair value of Garth$$s shares was $$52$ per share.

REQUIRED:

c$)$ Prepare the journal entries on the books of Wayne Corporation for the investment in Garth for the $2024$ fiscal year. $(6$ Marks$)$

On January $1,2025,$ Wayne Corporation acquired another $165,000$ common shares of Garth Company for $$52$ each. The book values of Garth$$s net assets were equal to fair values except for specialized equipment, which was now understated by $$36,000$ and had an estimated remaining useful life of $6$ years. During $2025,$ Garth Company reported a net income of $$550,000$ and paid dividends of $$170,000.$ At December $31,2025,$ the fair value of Garth$$s shares was $$50$ per share.

REQUIRED:

d$)$ Prepare the journal entries on the books of Wayne Corporation for the investment in Garth for the $2025$ fiscal year. $(6$ Marks$)$

QUESTION $1($continued$)$

On January $1,2026,$ Wayne Corporation sold $90,750$ shares of Garth Company for $$70$ per share. On the date of the sale, Wayne showed a balance of $$450,000$ in its contributed surplus account.

REQUIRED:

e$)$ Prepare the journal entry on the books of Wayne Corporation to record the sale of the shares in Garth. $(5$ Marks$)$