Question

Situation 1 Riverbed Cosmetics acquired 10% of the 191,000 shares of common stock of Martinez Fashion at a total cost of $14 per share on March 18, 2020. On June 30, Martinez declared and paid $69,200 cash dividend to all stockholders. On December 31, Martinez reported net income of $116,000 for the year. At December 31, the market price of Martinez Fashion was $15 per share. Situation 2 Marin, Inc. obtained significant influence over Seles Corporation by buying 40% of Seles's 28,500 outstanding shares of common stock at a total cost of $9 per share on January 1, 2020. On June 15, Seles declared and paid cash dividends of $38,100 to all stockholders. On December 31, Seles reported a net income of $78,200 for the year. Prepare all necessary journal entries in 2020 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 o for the amounts.) Date Credit Account Titles and Explanation Debit Situation 1: Riverbed Cosmetics Situation 2: Marin, Inc Question Attempts: Unlimited

Answer 1

Solution:

Situation 1:

Date	Accounts Titles and Explanation	Debit	Credit
Mar. 18	Investments in Available for sale securities	$         267,400
	Cash (191000*10%*$14)		$           267,400
	(Being securities purchased)
Jun. 30	Cash ($69200*10%)	$              6,920
	Dividend revenue		$                6,920
	( Being dividend revenue earned)
Dec. 31	Fair Value Adjustment (191000*10%*(15-14))	$            19,100
	Unrealized holding gain		$             19,100
	( Being fair value adjustment)

Situation 2:

Date	Accounts and Explanation	Debit	Credit
Jan. 1	Investments in Seles`s Stock	$         102,600
	Cash (28500*40%*$9)		$           102,600
	(Being securities purchased)
Jun. 15	Cash ($ 38100*40%)	$            15,240
	Investments in Seles`s Stock		$             15,240
	( Being dividend revenue earned)
Dec. 31	Investments in Seles`s Stock ($78200*40%)	$            31,280
	Equity Income / Revenue from investment		$             31,280
	( Being net income earned)