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E17-12 (Journal Entries for Fair Value and Equity Methods)

Resolved Question:

E17-12 (Journal Entries for Fair Value and Equity Methods) Presented on page 890 are two independent

Situation 1
Conchita Cosmetics acquired 10% of the 200,000 shares of common stock of Martinez Fashion at a total
cost 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 price
of Martinez Fashion was $15 per share. The securities are classified as available-for-sale.
Situation 2
Monica, Inc. obtained significant influence over Seles Corporation by buying 30% of Seles’s 30,000 outstanding
shares of common stock at a total cost of $9 per share on January 1, 2007. On June 15, Seles
declared and paid a cash dividend of $36,000. On December 31, Seles reported a net income of $85,000
for the year.
Prepare all necessary journal entries in 2007 for both situations.
Submitted: 6 years ago.
Category: Finance
Expert:  Manal Elkhoshkhany replied 6 years ago.

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