Question 3 These are two independent situations: Prepare all the necessary journ

Question

Question 3

These are two independent situations:

Prepare all the necessary journal entries for 2017 for (a) Sosey Cosmetics and (b) Williams Inc. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.)

2017

1. Sosey Cosmetics

Date

Account Titles and Explanation

Debit

Credit

2. Williams Inc.

Date

Account Titles and Explanation

Debit

Credit

List Of Accounts

Question 3

1. Sosey Cosmetics acquired 12% of the 182,000 shares of common stock of Elite Fashion at a total cost of $12 per share on March 18, 2017. On June 30, Elite declared and paid a $46,500 dividend. On December 31, Elite reported net income of $232,000 for the year. At December 31, the market price of Elite Fashion was $14 per share. The stock is classified as available-for-sale. 2. Williams Inc. obtained significant influence over Kasey Corporation by buying 25% of Kasey’s 22,800 outstanding shares of common stock at a total cost of $9 per share on January 1, 2017. On June 15, Kasey declared and paid a cash dividend of $36,700. On December 31, Kasey reported a net income of $129,000 for the year.

Explanation / Answer

a) Journal entries for Sosey Cosmetics (Amounts in $)

b) Journal entries for Williams Inc. (Amounts in $)

Date Account Titles and Explanation Debit Credit Mar. 18 Short-term Investments (182,000 shares*12%*$12) 262,080 Cash 262,080 June 30 Cash ($46,500*12%) 5,580 Dividend Revenue 5,580 Dec. 31 Fair Value Adjustment-Available-For-Sale [182,000*12%*($14-$12)] 43,680 Unrealized Gain or Loss - Equity 43,680

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