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    Journal Entries for Fair Value and Equity Methods

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    12. (Journal Entries for Fair Value and Equity Methods) Presented below are two
    independent situations.

    Situation 1
    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, 2003. 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, 2003. 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.

    Instructions
    Prepare all necessary journal entries in 2003 for both situations.

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    https://brainmass.com/business/the-accounting-cycle/journal-entries-for-fair-value-and-equity-methods-65149

    Solution Preview

    Situation 1: Journal entries by Conchita Cosmetics:

    To record purchase of 200,000 shares of Martinez Fashion at a cost of $13 per share:
    Mar 18 Available-for-Sale Securities Dr ...2,600,000
    Cash Cr.....................................2,600,000
    200,000 x 13= 2,600,000

    To record the dividend revenue from Martinez Fashion:
    Jun 30 Cash Dr.............................. 7,500
    Dividend Income ...

    Solution Summary

    The solution has journal Entries for Fair Value and Equity Methods

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