Rahman Inc. acquired 25% of the outstanding common shares of NajamInc. on December 31, 2019. The purchase price was $1,250,000 for 62,500 shares, and is equal to 25% of Najams carrying amount. Najam declared and paid a $0.75 per share cash dividend on June 15 and again on December 15, 2020. Najam reported net income of $520,000 for 2020. Rahman is a public company and applies IFRS.

Instructions

a. Prepare the journal entries for Rahman for 2019 and 2020, assuming that Rahman cannot exercise significant influence over Najam.

b. Prepare the journal entries for Rahman for 2019 and 2020, assuming that Rahman can exercise significant influence over Najam.