The following are two independent situations: 1. Lorfeld Ltd. acquired 10% of the 500,000 ordinary shares of

Question:

The following are two independent situations:

1. Lorfeld Ltd. acquired 10% of the 500,000 ordinary shares of Northbrook Enterprises at a total cost of €11 per share on June 17, 2020. On September 3, Northbrook declared and paid a €160,000 dividend. On December 31, Northbrook reported net income of €550,000 for the year.

2. Saa Ltd. obtained significant influence over McCarthy Company by buying 30% of McCarthy’s 100,000 outstanding ordinary shares at a cost of €18 per share on January 1, 2020. On May 15, McCarthy declared and paid a cash dividend of €150,000. On December 31, McCarthy reported net income of €270,000 for the year.

Prepare all necessary journal entries for 2020 for (a) Lorfeld and (b) Saa.

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...

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