Exercise 17-12 The following are two independent situations. Situation 1 Waterwa
ID: 2332035 • Letter: E
Question
Exercise 17-12
The following are two independent situations.
Situation 1
Waterway Cosmetics acquired 10% of the 187,000 shares of common stock of Martinez Fashion at a total cost of $13 per share on March 18, 2017. On June 30, Martinez declared and paid $68,400 cash dividend to all stockholders. On December 31, Martinez reported net income of $120,300 for the year. At December 31, the market price of Martinez Fashion was $14 per share.
Situation 2
Wildhorse, Inc. obtained significant influence over Seles Corporation by buying 30% of Seles’s 30,200 outstanding shares of common stock at a total cost of $9 per share on January 1, 2017. On June 15, Seles declared and paid cash dividends of $37,500. On December 31, Seles reported a net income of $77,600 for the year.
Prepare all necessary journal entries in 2017 for both situations. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Date
Account Titles and Explanation
Debit
Credit
Situation 1: Waterway Cosmetics
Situation 2: Wildhorse, Inc
Date
Account Titles and Explanation
Debit
Credit
Situation 1: Waterway Cosmetics
Jan. 1, 2017Mar. 18, 2017June 15, 2017June 30, 2017Dec. 31, 2017
Jan. 1, 2017Mar. 18, 2017June 15, 2017June 30, 2017Dec. 31, 2017
Jan. 1, 2017Mar. 18, 2017June 15, 2017June 30, 2017Dec. 31, 2017
Situation 2: Wildhorse, Inc
Jan. 1, 2017Mar. 18, 2017June 15, 2017June 30, 2017Dec. 31, 2017
Jan. 1, 2017Mar. 18, 2017June 15, 2017June 30, 2017Dec. 31, 2017
Jan. 1, 2017Mar. 18, 2017June 15, 2017June 30, 2017Dec. 31, 2017
Explanation / Answer
1.
2. Journal entries for Wildhorse,Inc
Date Account and explanation Debit($) Credit($) March 18,2017 Available for sale security in Martinez Fashion 243,100 Cash 243,100 (being 10% of Martinez fashion purchased @$13/share) (187000*10%813)=$243,100 June 30,2017 Cash 6,840 Dividend revenue 6,840 being Dividend revenue earned @10%of $68,400) Dec 31,2017 Available for sale securities in martinez fashion-fair value adjustment 18,700 Unrealized Gain or loss 18,700 (being unrealized gain recorded) $(14-13)*18,700 Dec 31,2017 Available for sale security in martinez Fashion 12,030 Revenue from securities available for sale 12,030 (being net income reported and recorded ) (120,300*10%)=$12,030Related Questions
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