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On January 1, 2020, Lucho Corporation purchased 40 percent (80,000 shares) of the common stock of Zulums, Inc., for $1,200,000 in cash and began to use the equity method for the investment. The price paid represented a $300,000 payment in excess of the book value of Lucho's share of Zulums' underlying net assets. Lucho was wiling to make this extra payment because of a recently developed patent held by Zulums with a 15-year remaining life. All other assets were considered appropriately valued on Zulums' books.

Zulums declares and pays a $250,000 cash dividend to its stockholders each year on September 15.

Zulums reported net income of $800,000 in 2020 and $750,000 in 2021. Each income figure was earned evenly throughout its respective years.

On July 1, 2021, Lucho sold 20,000 shares of its 80,000 shares in Zulums for $350,000 in cash. Although it sold this interest, Lucho maintained the ability to significantly influence Zulums' decision-making process.

Required: (Please show all calculations)

A. Prepare all necessary journal entries for Lucho's investment in Zulums for the year 2020.

B. Prepare all necessary journal entries for Lucho's investment in Zulumz for the year 2021.

C. Determine the balances for the following accounts in Lucho's books at the dates specified:

	9/15/2020	12/31/2020	6/30/2021	12/31/2021
Investment in Zulums
Equity in subsidiary earnings

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