Presented below are two independent situations: 1. Potomac Inc. acquired 10% of the 500,000 shares of common

Question:

Presented below are two independent situations:

1. Potomac Inc. acquired 10% of the 500,000 shares of common stock of Maryland Corporation at a total cost of $11 per share on June 17, 2010. On September 3, Maryland declared and paid a $160,000 dividend. On December 31, Maryland reported net income of $550,000 for the year.

2. Andy Fisher Corporation obtained significant influence over Bandit Company by buying 30% of Bandit’s 100,000 outstanding shares of common stock at a cost of $18 per share on January 1, 2010. On May 15, Bandit declared and paid a cash dividend of $150,000. On December 31, Bandit reported net income of $270,000 for the year.

Prepare all necessary journal entries for 2010 for

(1) Potomac and

(2) Andy Fisher.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...