In January 2014, Domingo, Inc., acquired 20 percent of the outstanding common stock of Martes, Inc., for $700,000. Martess assets on that date were recorded at $3,900,000 with liabilities of $900,000. Any excess of cost over book value of the investment was attributed to a patent having a remaining useful life of 10 years.

In 2014, Martes reported net income of $170,000. In 2015, Martes reported net income of $210,000. Dividends of $70,000 were declared in each of these two years.

USE GAAP

1. Suppose this investment gave Domingo the ability to exercise significant influence over Martes. Prepare the necessary journal entries.
2. Suppose this investment didn t give Domingo the ability to exercise significant influence over Martes. Prepare the necessary journal entries.