E17-12 (Journal Entries for Fair Value and Equity Methods) Presented on page 890 are two independentsituations.Situation 1Conchita Cosmetics acquired 10% of the 200,000 shares of common stock of Martinez Fashion at a totalcost of $13 per share on March 18, 2007. On June 30, Martinez declared and paid a $75,000 cash dividend.On December 31, Martinez reported net income of $122,000 for the year. At December 31, the market priceof Martinez Fashion was $15 per share. The securities are classified as available-for-sale.Situation 2Monica, Inc. obtained significant influence over Seles Corporation by buying 30% of Seles’s 30,000 outstandingshares of common stock at a total cost of $9 per share on January 1, 2007. On June 15, Selesdeclared and paid a cash dividend of $36,000. On December 31, Seles reported a net income of $85,000for the year.InstructionsPrepare all necessary journal entries in 2007 for both situations.
Please click here for the solutions
More than 5000 online tutoring sessions.