Presented below are two independent situations:
1. Lorfeld Inc. acquired 10% of the 500,000 shares of common stock of Northbrook Corporation at a total cost of $11 per share on June 17, 2012. On September 3, Northbrook declared and paid a $160,000 dividend. On December 31, Northbrook reported net income of $550,000 for the year.
2. Saa Corporation obtained significant influence over McCarthy Company by buying 30% of McCarthy’s 100,000 outstanding shares of common stock at a cost of $18 per share on January 1, 2012. On May 15, McCarthy declared and paid a cash dividend of $150,000. On December 31, McCarthy reported net income of $270,000 for the year.
Prepare all necessary journal entries for 2012 for (1) Lorfeld and (2) Saa.