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On January $1,2020,$ Palka, Inc., acquired $70$ percent of the outstanding shares of Sellinger Company for $$1,316,700$ in cash. The price

paid was proportionate to Sellinger's total fair value, although at the acquisition date, Sellinger had a total book value of $$1,580,000.$

All assets acquired and liabilities assumed had fair values equal to book values except for a patent $($six$-$year remaining life$)$ that was

undervalued on Sellinger's accounting records by $$291,000.$ On January $1,2021,$ Palka acquired an additional $25$ percent common

stock equity interest in Sellinger Company for $$513,125$ in cash. On its internal records, Palka uses the equity method to account for its

shares of Sellinger.

During the two years following the acquisition, Sellinger reported the following net income and dividends:

a$.$ Show Palka's journal entry to record its January $1,2021,$ acquisition of an additional $25$ percent ownership of Sellinger Company

shares.

b$.$ Prepare a schedule showing Palka's December $31,2021,$ equity method balance for its Investment in Sellinger account.

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Required B

Prepare a schedule showing Palka's December $31,2021,$ equity method balance for its Investment in Sellinger account.

$($Amounts to be deducted should be indicated with a minus sign.$)$

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