Question:
Bradster Co. acquired 20% of the outstanding common stock of Curly Co. on January 1, 2011, by paying $800,000 for the 40,000 shares. Curly declared and paid $.80 per share cash dividends on June 15, and December 15, 2011. Curly reported net income of $360,000 for the year.
Required
A. Prepare journal entries for Bradster assuming Curly cannot exercise significant influence over Curly. (Use the cost method)
B. Prepare journal entries for Bradster assuming Curly can exercise significant influence over Bradster. (Use the equity method).