For 2020, Sabil Corporation earned a net income of $480,000 and paid dividends of $18,000. At January

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Question:

For 2020, Sabil Corporation earned a net income of $480,000 and paid dividends of $18,000. At January 1, 2020, Sabil had $200,000 of $10 par value common stock outstanding and $1,500,000 of retained earnings. On January 1, 2020, Phyit Corporation bought the outstanding common stock of Sabil paying $200,000. All payments made by Phyit in excess of book value were attributable to equipment, which is depreciated over ten years on a straight-line basis.

Required:

Indicate how Phyit will record in its books (journal entries) the (a) acquisition of common stock of Sabil, the (b) recognition of dividend income, and/or (c) net income participation in Sabil under the following assumptions

1. Phyit purchased 10% of outstanding common stock.

2. Phyit purchased 30% of outstanding common stock.

3. Phyit purchased 70% of outstanding common stock