Presented below are two independent situations. 1. Chicory Cosmetics acquired 15

Question

Presented below are two independent situations. 1. Chicory Cosmetics acquired 15% of the 105,400 shares of common stock of Racine Fashion at a total cost of $15 per share on March 18, 2014. On June 30, Racine declared and paid a $72,800 dividend. On December 31, Racine reported net income of $114,950 for the year. At December 31, the market price of Racine Fashion was $17 per share. The stock is classified as non-trading. 2. Frank, Inc., obtained significant influence over Nowak Corporation by buying 30% of Nowak

Explanation / Answer

Case 1 Debt Asset march 18 cash paid for buying shares = 15810*15=137150 Cash..........................................................................237150 Expense of share buying..........................237150 june 30 divident paid to chicory cosmetics = (72800/105400)*15810 = 10920 Cash.................................................10920 Revenue.......................................................................10920 Case b Cash...........................................................................33450 Expense of share buying..........................33450 june 15 divident paid to chicory cosmetics = (35300/22300)*6690 = 10590 Cash.................................................10590 Revenue.......................................................................10590

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