Harper,  Inc. acquires 40 percent of the outstandingvoting stock of Kinman Company on January 1, 2017, for $242,500 incash. The book value of Kinman's net assets on that date was$425,000, although one of the company's buildings, with a $62,800carrying amount, was actually worth $119,050. This building had a10-year remaining life. Kinman owned a royalty agreement with a20-year remaining life that was undervalued by $125,000.

Kinman sold inventory with an original cost of $37,800 to Harperduring 2017 at a price of $54,000. Harper still held $23,550(transfer price) of this amount in inventory as of December 31,2017. These goods are to be sold to outside parties during2018.

Kinman reported a $44,200 net loss and a $23,100 othercomprehensive loss for 2017. The company still manages to declareand pay a $16,000 cash dividend during the year.

During 2018, Kinman reported a $58,600 net income and declaredand paid a cash dividend of $18,000. It made additional inventorysales of $122,000 to Harper during the period. The original cost ofthe merchandise was $76,250. All but 30 percent of this inventoryhad been resold to outside parties by the end of the 2018 fiscalyear.

Prepare all journal entries for Harper for 2017 and 2018 inconnection with this investment. Assume that the equity method isapplied. (If no entry is required for a transaction/event,select "No journal entry required" in the first account field. Donot round intermediate calculations.)