Prepare all the necessary journal entries for 2017 for (a) Gambino Cosmetics and

Question

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.)

1. Gambino Cosmetics acquired 10% of the 120,000 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 a $74,000 dividend. On December 31, Nevins reported net income of $111,000 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 21,000 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 $23,000. On December 31, Rogan reported a net income of $83,000 for the year.

Explanation / Answer

SOLUTION

(A)

(B)

Date Account titles and Explanation Debit ($) Credit ($) March 18 Stock Investments 132,000 Cash 132,000 (120,000 * 10% * $11) June 30 Cash 7,400 Dividend revenue 7,400 ($74,000 * 10%) Dec.31 Fair Value Adjustment - Available-for-Sale 24,000 Unrealized Gain or Loss- Equity 24,000 (120,000 * 10% * $13) - (120,000 * 10% * $11)

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