Question

Situation 1
Sunland Cosmetics acquired 10% of the 193,000 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 $67,500 cash dividend to all stockholders. On December 31, Martinez reported net income of $118,700 for the year. At December 31, the market price of Martinez Fashion was $15 per share.

Situation 2
Coronado, Inc. obtained significant influence over Seles Corporation by buying 40% of Seles’s 30,700 outstanding shares of common stock at a total cost of $8 per share on January 1, 2020. On June 15, Seles declared and paid cash dividends of $38,300 to all stockholders. On December 31, Seles reported a net income of $84,200 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 0 for the amounts.)

Answer 1

Answer
Situation 1	Journal Entry
Date	Account title and Explanation	Debit	Credit
18-Mar-20	Available for sale Securities	$                      270,200		(193000 shares*10%*$14)
	Cash		$              270,200
30-Jun-20	Cash	$                           6,750		($67500*10%)
	Dividend Revenue		$                   6,750
31-Dec-20	Securities Fair Value Adjustment	$                        19,300		(19300 shares*($15-14))
	Unrealised Holding Gain or Loss-Equity		$                19,300
Situation 2	Journal Entry
Date	Account title and Explanation	Debit	Credit
1-Jan-20	Investment in Seles Corporation Stock	$                        98,240		(30700 shares*40%*$8)
	Cash		$                98,240
15-Jun-20	Cash	$                        15,320		($38300*40%)
	Investment in Seles Corporation Stock		$                15,320
31-Dec-20	Investment in Seles Corporation Stock	$                        33,680		($84200*40%)
	Revenue		$                33,680