Presented below are two independent situations. Prepare all the necessary journa

Question

Presented below are two independent situations.

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

Debit

Credit

1. Gambino Cosmetics acquired 10% of the 150,000 shares of common stock of Nevins Fashion at a total cost of $13 per share on March 18, 2017. On June 30, Nevins declared and paid a $78,000 dividend. On December 31, Nevins reported net income of $130,000 for the year. At December 31, the market price of Nevins Fashion was $15 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 38,000 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 $37,000. On December 31, Rogan reported a net income of $78,000 for the year.

Explanation / Answer

  Journal Entries (Amounts in $)

No. Date Account Titles and Explanations Debit Credit a) Mar. 18 Stock Investments (150,000 shares*10%*$13) 195,000 Cash 195,000 June 30 Cash 7,800 Dividend Revenue ($78,000*10%) 7,800 Dec. 31 Fair Value Adjustment-Available for Sale 30,000 Unrealized Gain or Loss-Equity [(150,000 shares*10%*$15) - $195,000] 30,000 b) Jan. 1 Stock Investments 136,800 Cash (38,000*40%*$9) 136,800 June 15 Cash 14,800 Stock Investments ($37,000*40%) 14,800 Dec. 31 Stock Investments 31,200 Revenue from Stock Investments ($78,000*40%) 31,200

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