Question
On January 1, 2015, Bactin Corporation acquired 10% of Oakton Company for $100,000. On that date, the total book value and fair value of Oakton's
On January 1, 2015, Bactin Corporation acquired 10% of Oakton Company for $100,000. On that date, the total book value and fair value of Oakton's net assets was $900,000. Any difference between cost and fair value is attributable to goodwill. In 2015, Oakton reported net income of $60,000 and paid dividends of $30,000. On January 1, 2016, Bactin Corporation bought another 10% of Oakton for $100,000, and on that date, the book value and fair value of Oakton's net assets still was $900,000 (the fair value of Oakton did not change during 2015). Bactin concluded that its 20% ownership now allowed it to significantly influence Oakton's operations. In 2016, Oakton reported net income of $80,000 and paid dividends of $40,000. Required: Prepare all journal entries for Bactin for 2015 and 2016, assuming no change in fair value of the Oakton stock during that time period.
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