Question
. Ordello Company buys 20 percent of the capital stock of Pottsboro Corporation on January 1, Year One, for $370,000. Ordello plans to hold these
. Ordello Company buys 20 percent of the capital stock of Pottsboro Corporation on January 1, Year One, for $370,000. Ordello plans to hold these shares for an indefinite period of time. Pottsboro reports net income of $80,000 in Year One and $100,000 in Year Two. The company pays a total cash dividend of $30,000 in each year. Ordellos investment is worth $420,000 at the end of Year One and $470,000 at the end of Year Two. Ordello sells this investment on the first day of Year Three for $470,000 in cash. a. Assume that the ownership of these shares does not give Ordello the ability to apply significant influence over Pottsboro. Make all journal entries for Ordello for Years One, Two, and Three. b. Assume that the ownership of these shares does give Ordello the ability to apply significant influence over Pottsboro. Make all journal entries for Ordello for Years One, Two, and Three.
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