Question

These are two independent situations: 1. Sheridan Cosmetics acquired 13% of the 326,700 shares of common stock of Elite Fashion at a total cost of $14 per share on March 18, 2020. On June 30, Elite declared and paid a $78,700 dividend. On December 31, Elite reported net income of $266,540 for the year. At December 31, the market price of Elite Fashion was $17 per share 2. Concord Inc. obtained significant influence over Kasey Corporation by buying 25% of Kasey's 28,200 outstanding shares of common stock at a total cost of $10 per share on January 1, 2020. On June 15, Kasey declared and paid a cash dividend of $33,700. On December 31, Kasey reported a net income of $125,600 for the year. Prepare all the necessary journal entries for 2020 for Sheridan Cosmetics. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.) Account Titles and Explanation Date Debit Credit

Answer 1

Situation 1 Answer Accounts Title and Explanation Credit Debit Date Available- for- Sale Securities (326,700 shares x $14 per share) $4,573,800 March, 18 2020 $4,573,800 Cash (To record the Equity Investment) Cash $10,231 June, 30 2020 $10,231 ($78,700 x 13%) Dividend Revenue (To record the Dividend Revenue Securities Fair adjustment (available-for sale) Unrealized holding gain or loss- Equity [326,700 shares x ($17- $14)] (To record the investment at fair value) $980,100 Dec, 31 2020 $980,100

Situation 2 Accounts Title and Explanation Credit Debit Date Investment in Kasey Corp. Stock [(28,200 shares x 25%) x $10] $70,500 Jan, 1 2020 $70,500 Cash (To record the Investment in Kasey Corp) Cash ($33,700 x 25%) $8,425 June, 15 2020 $8,425 Investment in Kasey Corp. Stock (To record the receipt of cash dividends from Kasey Corp.) Investment in Kasey Corp. Stock ($125,600 x 25%) $31,400 Dec, 31 2020 Income from Investment $31,400 (To record the Income from Investment)