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The following are two independent situations. Situation 1 Marin Cosmetics acquired 10% of the 212,000 shares of...

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Accounting

The following are two independent situations.

Situation 1
Marin Cosmetics acquired 10% of the 212,000 shares of common stockof Martinez Fashion at a total cost of $13 per share on March 18,2017. On June 30, Martinez declared and paid $76,400 cash dividendto all stockholders. On December 31, Martinez reported net incomeof $125,800 for the year. At December 31, the market price ofMartinez Fashion was $14 per share.

Situation 2
Headland, Inc. obtained significant influence over SelesCorporation by buying 40% of Seles’s 31,700 outstanding shares ofcommon stock at a total cost of $9 per share on January 1, 2017. OnJune 15, Seles declared and paid cash dividends of $33,100. OnDecember 31, Seles reported a net income of $77,900 for theyear.

Prepare all necessary journal entries in 2017 for bothsituations.(3 entries for each)

Answer & Explanation Solved by verified expert
4.2 Ratings (662 Votes)

Situation -1
Date Accounts Titles and Explanation Debit Credit
March 18, 2017 Available-for-Sale Securities $275,600
Cash $275,600
June 30, 2017 Cash $7,640
Dividend Revenue ($76,400 x 10%) $7,640
Dec 31, 2017 Securities Fair Value Adjustment (Available for-Sale) $21,200
Unrealized Holding Gain or Loss—Equity $21,200
($14 - $13) X 21,200 shares = $21,200
Situation -2
Date Accounts Titles and Explanation Debit Credit
January 1, 2017 Investment in Seles Corp Stock $114,120
Cash [(31,700 X 40%) X $9] $114,120
June 15, 2017 Cash ($33,100 X 40%) $13,240
Investment in Seles Corp. Stock $13,240
Dec 31, 2017 Investment in Seles Corp. Stock             (40% X $77,900) $31,160
Revenue from Investment $31,160

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