Question

Presented below are two independent situations.

1. Gambino Cosmetics acquired 15% of the 120,500 shares of common stock of Nevins Fashion at a total cost of $12 per share on March 18, 2015. On June 30, Nevins declared and paid a $70,400 dividend. On December 31, Nevins reported net income of $118,200 for the year. At December 31, the market price of Nevins Fashion was $14 per share. The stock is classified as available-for-sale.
2. Kanza, Inc., obtained significant influence over Rogan Corporation by buying 30% of Rogan’s 32,900 outstanding shares of common stock at a total cost of $7 per share on January 1, 2015. On June 15, Rogan declared and paid a cash dividend of $27,400. On December 31, Rogan reported a net income of $73,100 for the year.

Prepare all the necessary journal entries for 2015 for (a) Gambino Cosmetics and (b) Kanza, Inc. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.)

No.
Date
Account Titles and Explanation
Debit
Credit
(a)

Jan. 1
Mar. 18
June 15
June 30
Dec. 31

Jan. 1
Mar. 18
June 15
June 30
Dec. 31

Jan. 1
Mar. 18
June 15
June 30
Dec. 31
(b)

Jan. 1
Mar. 18
June 15
June 30
Dec. 31

Jan. 1
Mar. 18
June 15
June 30
Dec. 31

Jan. 1
Mar. 18
June 15
June 30
Dec. 31

SHOW LIST OF ACCOUNTS

Answer 1

(a) Gambino Cosmetics

Date	Account Titles and Explanation	Debit	Credit
Mar. 18	Stock Investments	$216,900
	Cash		$216,900
June 30	Cash	$10,560
	Dividend Revenue		$10,560
Dec. 31	Fair Value Adjustment—Available-for-Sale	$36,150
	Unrealized Gain or Loss—Equity		$36,150

(b) Kanza, Inc.

Date	Account Titles and Explanation	Debit	Credit
Jan. 1	Stock Investments	$69,090
	Cash		$69,090
June 15	Cash	$8,220
	Stock Investments		$8,220
Dec. 31	Stock Investments	$21,930
	Revenue from Stock Investments in Rogan Corp.		$21,930

Explanation:

a. Gambino Cosmetics

March 18 => Stock Investment = 0.15 x 120,500 x $12 = $216,900

June 30 => Dividend Revenue = 0.15 x $70,400 = $10,560

Dec. 31 => Unrealized gain = 0.15 x 120,500 x ($14 - $12) = $36,150

(b) Kanza, Inc.

Jan. 1 => Stock Investment = 0.30 x 32,900 x $7 = $69,090

June 15 => Dividend = 0.30 x $27,400 = $8,220

Dec. 31 => Revenue from Stock Investments in Rogan Corp. = 0.30 x $73,100 = $21,930

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