On January 1, 2012, 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 2012, Oakton reported net income of $60,000 and paid dividends of $30,000. On January 1, 2013, 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 2012). Bactin concluded that its 20% ownership now allowed it to significantly influence Oakton's operations. In 2013, Oakton reported net income of $80,000 and paid dividends of $40,000.
Required:
Prepare all journal entries for Bactin for 2012 and 2013, assuming no change in fair value of the Oakton stock during that time period.

Question

Quizplus · Accepted Answer

The Answer of On January 1, 2012, 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 2012, Oakton reported net income of $60,000 and paid dividends of $30,000. On January 1, 2013, 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 2012). Bactin concluded that its 20% ownership now allowed it to significantly influence Oakton's operations. In 2013, Oakton reported net income of $80,000 and paid dividends of $40,000.
Required:
Prepare all journal entries for Bactin for 2012 and 2013, assuming no change in fair value of the Oakton stock during that time period.

On January 1, 2012, Bactin Corporation Acquired 10% of Oakton