The following are two independent situations. Situation 1 Oriole Cosmetics acqui

Question

The following are two independent situations.

Situation 1
Oriole 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, 2017. On June 30, Martinez declared and paid $69,200 cash dividend to all stockholders. On December 31, Martinez reported net income of $116,000 for the year. At December 31, the market price of Martinez Fashion was $15 per share.

Situation 2
Waterway, Inc. obtained significant influence over Seles Corporation by buying 40% of Seles’s 28,500 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 $38,100. On December 31, Seles reported a net income of $78,200 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: Oriole Cosmetics

Situation 2: Waterway, Inc

Explanation / Answer

Oriole Cosmetics Date Accounting titles & Explanations Debit Credit 18-Mar Avaialble for sale securities 267400 Cash 267,400 (191000*10%*14) 30-Jun cash 6,920 dividend income 6,920 (69200*10%) 31-Dec Fair value adjustment 19100 unrealized holding gain or loss 19,100 (19,100*1) Situation 2 Waterway inc Date Accounting titles & Explanations Debit Credit Investment in Seles Corporation 102600 cash 102,600 (28500*40%*9) cash 15240 investment in Seles Corporation 15,240 (38100*40%) investmet in Seles Corporation 31280 investment income 31,280 (78200*40%)

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