Question $1(12$ marks$)$

On January $1,$ Year $5,$ Jump Company purchased $10,000$ shares of Skip Inc. $($total shares

issued $15,000)$ for $$60,000$ and uses the equity method to account for its investment in Skip

Inc. On the acquisition date, acquisition differential totalled $$12,000$ all allocated to capital

assets with aremaining useful life of $6$ years.

During Year $5,$ Skip had net income of $$26,000($earned evenly over the year$)$ and on May

$1,$Year $5,$ paid dividends of $$6,000.$ On October $1,$ Year $5,$ Jump sold $1,000$ of the $10,000$

shares that it held in Skip for proceeds of $$7,500.$

Required $($show all work for full marks$)$

a$)$ Prepare the Jump's journal entry for the sale of the shares on October $1,$ Year $5.$

b$)$ What will the balance in the investment account be at December $31,$ Year $5?$