Situation 1 Larkspur Cosmetics acquired 10% of the 184,000 shares of common stock of Martinez Fashion...

Situation 1
Larkspur Cosmetics acquired 10% of the 184,000 shares of common stock of Martinez Fashion at a total cost of $13 per share on March 18, 2017. On June 30, Martinez declared and paid $69,400 cash dividend to all stockholders. On December 31, Martinez reported net income of $113,000 for the year. At December 31, the market price of Martinez Fashion was $14 per share.

Situation 2
Cullumber, Inc. obtained significant influence over Seles Corporation by buying 30% of Seles’s 31,400 outstanding shares of common stock at a total cost of $9 per share on January 1, 2017. On June 15, Seles declared and paid cash dividends of $39,100. On December 31, Seles reported a net income of $85,000 for the year.

Prepare all necessary journal entries in 2017 for both situations. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Expert Solution

Situation 1
	Journal Entries
Date	Accounting titles & Explanations	Debit	Credit
2017
18-Mar	Available for sale securities	239200
	cash		239,200
	(184,00010%13)

30-Jun	Cash	6,940
	Dividend income		6,940
	(69,400*10%)

31-Dec	Fair value adjustmend	18,400
	Unrealized holding gain or loss		18,400
	(18,400*1)






Situation 2
	Journal Entries
Date	Accounting titles & Explanations	Debit	Credit
2017

1-Jan	Investment in Seles Corp Stock	84780
	Cash		84,780
	(31,40030%9)

15-Jun	Cash	11730
	Investment in Seles corp stock		11,730
	(39,100*30%)

31-Dec	investment in Seles Corp Stock	25500
	Revenue		25,500
	(85000*30%)

ekkarill92 answered 2 years ago

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