On January 4, 2011, RTN Industries paid $648,000 for 20,000 shares of Austin Cattle Company common stock. The investment represents a 30% interest in the net assets of Austin and gave RTN the ability to exercise significant influence over Austins operations. RTN received dividends of $3.00 per share on December 6, 2011, and Austin reported net income of $320,000 for the year ended December 31, 2011. The market value of Austins common stock at December 31, 2011, was $32 per share. The book value of Austins net assets was $1,600,000 and:

a. The fair market value of Austins depreciable assets, with an average remaining useful life of 8 years, exceeded their book value by $160,000.

b. The remainder of the excess of the cost of the investment over the book value of net assets purchased was attributable to goodwill.

Required:

1. Prepare all appropriate journal entries related to the investment during 2011, assuming RTN accounts for this investment by the equity method.

2. Prepare the journal entries required by RTN, assuming that the 20,000 shares represent a 10% interest in the net assets of Austin rather than a 30% interest, and that RTN anticipates holding their investment in Austin for the foreseeable future.