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E$16\mathrm{.}16($LO $2,3)($Fair Value and Equity Method Gompared$)$ Jaycie Phelps Inc. acquired $20\%$ of the outstanding common stock of Theresa Kulikowski Inc. on December $31,2025.$ The purchase

price was $$1,200,000$ for $50,000$ shares. Kulikowski Inc. declared and paid an $$0\mathrm{.}85$ per share cash dividend on June $30$ and on December $31,2026.$ Kulikowski reported net income of $$730,000$ for $2026.$ The

fair value of Kulikowski's stock was $$27$ per share at December $31,2026.$

Instructions

a$.$ Prepare the journal entries for Jaycie Phelps Inc. for $2025$ and $2026,$ assuming that Phelps cannot exercise significant influence over Kulikowski.

b$.$ Prepare the journal entries for Jaycie Phelps Inc. for $2025$ and $2026,$ assuming that Phelps can exercise significant influence over Kulikowski.

c$.$ At what amount is the investment in securities reported on the balance sheet under each of these methods at December $31,2026?$ What is the total net income reported in $2026$ under each ofthese

methods?