Jaycie Phelps Inc. acquired 20% of the outstanding common stock of Theresa Kulikowski Inc. on December 31, 2020. The purchase was $1,200,000 for 50,000 shares. Kulikowski Inc. declared and paid a $0.85 per share cash dividend on June 30 and December 31, 2021. Kulikowski reported a net income of $730,000 for 2021. The fair value of Kulikowskis stock was $27 per share on December 31, 2021.

Instructions:

1. Prepare the journal entries for Jaycie Phelps Inc. for 2020 and 2021, assuming that Phelps cannot exercise significant influence over Kulikowski.
2. Prepare the journal entries for Jaycie Phelps Inc. for 2020 and 2021, assuming that Phelps can exercise significant influence over Kulikowski.