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Exercise 17-12 (E17-12) Journal Entries for Fair Value and Equity Methods

Exercise 17-12 (E17-12) Journal Entries for Fair Value and Equity Methods
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ACCOUNTING

ACC/423 (ACC423)
INTERMEDIATE FINANCIAL ACCOUNTING III
University of Phoenix (UoP)

Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2007).
Intermediate Accounting, (12th ed.) (13th Ed.)
Hoboken, NJ: John Wiley & Sons.

Week Three (Week 3) Chapter 17

Exercise 17-12 (E17-12) (Journal Entries for Fair Value and Equity Methods) Presented on page 890 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, 2007. 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, 2007. 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 2007 for both situations.

 

FILE: MS WORD

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