On January 4, Year 1, Ferguson Company purchased 480,000 shares of Silva Company directly from one of the founders for a price of $30 per share. Silva has 1,200,000 shares outstanding, including the Daniels shares. On July 2, Year 1, Silva paid $750,000 in total dividends to its shareholders. On December 31, Year 1, Silva reported a net income of $2,000,000 for the year. Ferguson uses the equity method in accounting for its investment in Silva.
a. Provide the Ferguson Company journal entries for the transactions involving its investment in Silva Company during Year 1.
b. Determine the December 31, Year 1, balance of the investment in Silva Company stock account.
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