On January 1, 2015, Aztec Company purchased 10,000 shares of the stock of Baker, Inc., and did obtain significant influence. The investment is intended as a long-term investment. The stock was purchased for $80,000, and represents a 30% ownership stake. Baker made $40,000 of net income in 2015, and paid dividends of $10,000. The price of Baker’s stock increased from $20 per share at the beginning of the year, to $22 per share at the end of the year.
Requirements:
a. Prepare the January 1 and December 31 general journal entries for Aztec Company.
b. How much should the Aztec Company report on the balance sheet for the investment in Aztec at the end of 2015?