E17.12 (LO 2, 3) (Journal Entries for Fair Value and Equity Methods)pendent situations.The follovWIng ale iut-Situation 1: Conchita Cosmetics acquired 10% of the 200,000 shares of common stock of Martinez Fash-ion at a total cost of $13 per share on March 18, 2020. On June 30, Martinez declared and paid $75,000cash dividends to all stockholders. On December 31, Martinez reported net income of $122,000 for theyear. At December 31, the market price of Martinez Fashion was $15 per share.Situation 2: Monica, Inc. obtained significant influence over Seles Corporation by buying 30% of Seles's30,000 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 $36,000 to all stockholders. On December 31, Seles reported anet income of $85,000 for the year.InstructionsPrepare all necessary journal entries in 2020 for both situations.

Journal entry is a primary entry that records the financial transactions initially.

Answered: Situation 1: Conchita Cosmetics…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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On December 15, 2021, Blue Company paid $100,000 for 8,000 shares of Marble Company common stock. The ownership in Marble Company is 10%. Marble reported net income of $64,000 for the year ended December 31, 2021. The fair value of the Marble stock on that date was $54 per share. What amount will be reported in the balance sheet of Blue Company for the investment in Marble at December 31, 2021? Multiple Choice There is no correct answer. $387,000. $357,000. $372,000. $432,000.
During 2023, Elisabeth Ltd. purchased 8,000 shares of Lilly of the Valley Corp. for $34 per share ($272,000 total). Elisabeth held these shares until September 2025, when it sold them for $42 per share. During these three years, Lilly of the Valley paid dividends of $2 per share on July 31. On Elisabeth's fiscal year-end (December 31), shares of Lilly of the Valley closed at $39, $30, and $46 in 2023, 2024, and 2025, respectively. Required Assume that the company designated half of the Lilly of the Valley shares as FVPL and the other half irrevocably elected to record fair value changes through OCI. Determine the amounts to be reported on Elisabeth's balance sheet and statement of comprehensive income with respect to the company's investment in Lilly of the Valley Corp. What do you observe about the total amount of retained earnings for the three years combined? Complete the analysis for 2024. Balance sheet Financial asset Equity: AOCI on Lilly of the Valley shares* Retained earnings…
An investor company purchased 17,000 of the 50,000 outstanding shares of the investee company's common stock for $338,000 on January 1, 2021. During 2021, the investee company declared dividends of $33,000 and reported earnings for the year of $158,000. If the investor company uses the equity method of accounting for its investment in the investee company, it should report Dividend Revenue from the investee for 2021 in the amount of $_______. (If there is no Dividend Revenue, then enter 0. Do not round your answer for any part of the computation.)
n January 1, 2021, Beilich Enterprises bought 20% of the outstanding common stock of Wolfe Construction Company for $600 million cash. Wolfe’s net income for the year ended December 31, 2021, was $300 million. During 2021, Wolfe declared and paid cash dividends of $60 million. Beilich recorded the investment as follows: ($ in millions) Purchase Investment in Wolfe Construction shares 600 Cash 600 Net income Investment in Wolfe Construction shares (20% x $300 million) 60 Investment revenue 60 Dividends Cash (20% × $60 million) 12 Investment in Wolfe Construction shares. 12 Required:What would be the pretax amounts related to the investment that Beilich would report in its statement of cash flows for the year ended December 31, 2021? (Enter your answers in millions (i.e., 10,000,000 should be entered as 10). Cash outflows should be indicated by a minus sign.)
Situation 1: Novak 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, 2025. On June 30, Martinez declared and paid $67,500 cash dividends 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: Splish, 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, 2025. 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 2025 for both situations. (List all debit entries before credit entries. 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…
On January 1, 2020, Windsor Company purchased 6,100 shares of Kusher Company stock for $439,200. Windsor's investment represents 30 percent of the total outstanding shares of Kusher. During 2020, Kusher paid total dividends of $152,000 and reported net income of $456,000. What revenue does Windsor report related to this investment and what is the amount to be reported as an investment in Kusher stock at December 31? Revenue $ Investment in Kusher stock at December 31 $
Assume that Echoing Green, featured in this chapter’s opener, makes an investment in Sustain Inc., a sustainability consulting firm. The company purchases 200 shares of Sustain stock for $15,000 cash plus a broker’s fee of $500 cash. Sustain has 500 shares of common stock outstanding, and Echoing Green will be able to significantly influence its policies. Required 1. Prepare the journal entry to record the investment in Sustain on January 1. 2. Sustain declares and pays a dividend of $1,000. Prepare the journal entry to record Echoing Green’s receipt of its share of the dividend on July 1. 3. Sustain reports net income of $5,000. Prepare the journal entry to record Echoing Green’s share of those earnings on December 31.
On January 1, 2020, Apple Inc. purchased 15% of the voting shares of Pears Inc. for $87,000. Apple Inc. does not have significant influence over Pears Inc. Apple’s net income and declared dividends for the following three years are as follows Net Income Dividends 2019 $10,000 $70,000 2018 $70,000 $80,000 2017 $50,000 $20,000 1. What is the journal entry to record Apple's share of Pear's dividends for 2017 2. What is the journal entry to record Apple's share of Pear's net income for 2017 (if any)?
The following are two independent situations.Situation 1Cheyenne 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 $80,900 cash dividend to all stockholders. On December 31, Martinez reported net income of $121,000 for the year. At December 31, the market price of Martinez Fashion was $15 per share.Situation 2Ayayai, Inc. obtained significant influence over Seles Corporation by buying 30% of Seles’s 29,700 outstanding shares of common stock at a total cost of $10 per share on January 1, 2020. On June 15, Seles declared and paid cash dividends of $33,000 to all stockholders. On December 31, Seles reported a net income of $79,200 for the year.Prepare all necessary journal entries in 2020 for both situations.
Carla, Inc. purchased 1,810 shares of Oneida Corporation common stock for $84,600. During the year. Oneida paid a cash dividend of $1.10 per share. At year-end, Oneida stock was selling for $43.90 per share. Prepare Carla's journal entries to record (a) the purchase of the investment, (b) the dividends received, and (c) the fair value adjustment. (Assume a zero balance in the Fair Value Adjustment account.) (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.) (a) (b) (c) Account Titles and Explanation Debit Credit
On January 1, 2022, Mojito Corporation purchased 20% (20,000 shares) of the outstanding stock of Dulcinea Corporation for $153,000. During 2022, Dulcinea Corporation paid total dividends of $45,000 and earned $80,000 in net income. At the end of 2022, Dulcinea Corporation’s stock had a fair market value of $155,000. Required: Prepare the journal entries that Mojito would make during 2022 assuming that they do NOT have significant influence over Dulcinea as a result of their stock ownership (i.e. fair value method). Prepare the journal entries that Mojito would make during 2022 assuming that they do have significant influence over Dulcinea as a result of their stock ownership (i.e. equity method).
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