On January 2, 2020, Basil Corp. invested $4,150,000 in Oregano Inc. for 40% of its outstanding common shares. At this time, the book value (equity) of Oregano Inc. was $8,400,000. Oreganos pays out 25% of its net income in dividends each year. Basil elects two of five members of Oreganos board of directors. During 2020, Basil received a cash dividend of $250,000 from Oregano Inc.

Instructions

a. Record the initial purchase of the Oregano Inc. shares by Basil Corp. in 2020.

b. Calculate Oregano Inc.s net income for 2020.

c. Record the additional 2020 journal entries related to this investment on Basils books.