Conchita Cosmetics acquired 10% of the 200,000 shares of common stock of Martinez Fashion at a total cost of $13 per share on March 18, 2014. On June 30, Martinez declared and paid a $75,000 cash dividend. On December 31, Martinez reported net income of $122,000 for the year. At December 31, the market price of Martinez Fashion was $15 per share. The securities are classified as available-for-sale. Situation 2 Monica, Inc. obtained significant influence over Seles Corporation by buying 30% of Seles’s 30,000 outstanding shares of common stock at a total cost of $9 per share on January 1, 2014. On June 15, Seles declared and paid a cash dividend of $36,000. On December 31, Seles reported a net income of $85,000 for the year.

1. 18-03

Dr Investment in AFS $2,60,000

Cr Cash $2,60,000

30-06

Dr Cash $7,500

Cr Dividend Revenue $7,500

31-12

Dr Securities Fair value Adjustment$40,000

Cr Unrealized Holding Gain $40,000

2. 01/01

Dr Investment in S Corp $81,000

Cr Cash $81,000

15/06

Dr Cash $10,800

Cr Investment in S Corp $10,800

31/12

Dr Investment in S Corp $25,500

Cr Revenue from Investment $25,500

Explanation:

1. Preparation of the journal entries

18-03

Dr Investment in AFS $2,60,000

(200000*10%*13)

Cr Cash $2,60,000

(Being to Record investment made)

30-06

Dr Cash $7,500

(75000*10%)

Cr Dividend Revenue $7,500

(Being to Record Dividend Earned)

31-12

Dr Securities Fair value Adjustment$40,000

Cr Unrealized Holding Gain $40,000

( 20000*2)

(Being To Record Investment at Fair Value)

2. Preparation of Journal Entries

01/01

Dr Investment in S Corp $81,000

(30000*30%*9)

Cr Cash $81,000

(Being to Record investment made)

15/06

Dr Cash $10,800

(36000*30%)

Cr Investment in S Corp $10,800

(Being To Record Dividend Earned)

31/12

Dr Investment in S Corp $25,500

(85000*30%)

Cr Revenue from Investment $25,500

(Being To Record Income earned)

i might look it up later.