1. Gambino Cosmetics acquired 10% of the 210,000 shares of common stock of Nevin
ID: 2510007 • Letter: 1
Question
1. Gambino Cosmetics acquired 10% of the 210,000 shares of common stock of Nevins Fashion at a total cost of $11 per share on March 18, 2017, On June 30, Nevins declared and paid $52,000 dividend. On December 31, Nevins reported net income of $122,000 for the year. At December 31, the market price of Nevins Fashion was $13 per share. The stock is classified as available-for-sale 2. Kanza, Inc., obtained significant influence over Rogan Corporation by buying 40% of Rogan's 20,000 outstanding shares of common stock at a total cost of $9 per share on January 1, 2017, On June 15, Rogan declared and paid a cash dividend of $40,000. On December 31, Rogan reported a net income of $85,000 for the year Prepare all the necessary journal entries for 2017 for (a) Gambino Cosmetics and (b) Kanza, Inc. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.) No. Date Account Titles and Explanation (a) Mar. 18 TTCommon Stock Debit Credit 210000 Cash 210000 Dec. 31Cash 21000 Dividend Revenue 21000 Dec. 31Fair Value Adjustment-Ava 420000 Unrealized Gain or Loss 420000 Jan. 1 TStock Investments 180000 Cash 180000 Dec. 31 Cash 16000 Stock Investments 16000 Dec. 31Stock Investments 34000 Gain on Sale of Stock I 34000Explanation / Answer
1) Date Accounts Titles Debit $ Credit $ 18-Mar Available for sale 2310000 Cash 2310000 (210000*11) 30-Jun Cash 52000 Dividend income 52000 31-Dec Available for sale 420000 Unrealised income on fair value 420000 ($13-$11)*210000 2) Jan 1 2017 Equity investment in Rogan 180000 Cash 180000 (20000*$9=180000) 15-Jun-17 Cash 16000 Equity investment in Rogan 16000 (40000*40%) Dec 31 2017 Equity investment in Rogan 34000 Net Income in Rogan 34000 (85000*40%=34000)
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