Presented below are two independent situations. 1. Chicory Cosmetics acquired 15% of the 297,300 shares of common stock of Racine Fashion at a total cost of $14 per share on March 18, 2012. On June 30, Racine declared and paid a $73,900 dividend. On December 31, Racine reported net income of $124,360 for the year. At December 31, the market price of Racine Fashion was $16 per share. The stock is classified as available-for-sale. 2. Frank, Inc., obtained significant influence over Nowak Corporation by buying 30% of Nowak’s 33,600 outstanding shares of common stock at a total cost of $7 per share on January 1, 2012. On June 15, Nowak declared and paid a cash dividend of $28,800. On December 31, Nowak reported a net income of $82,000 for the year. Prepare all the necessary journal entries for 2012 for (1) Chicory Cosmetics and (2) Frank, Inc.

Presented below are two independent situations.

1.		Chicory Cosmetics acquired 15% of the 297,300 shares of common stock of Racine Fashion at a total cost of $14 per share on March 18, 2012. On June 30, Racine declared and paid a $73,900 dividend. On December 31, Racine reported net income of $124,360 for the year. At December 31, the market price of Racine Fashion was $16 per share. The stock is classified as available-for-sale.
2.		Frank, Inc., obtained significant influence over Nowak Corporation by buying 30% of Nowak’s 33,600 outstanding shares of common stock at a total cost of $7 per share on January 1, 2012. On June 15, Nowak declared and paid a cash dividend of $28,800. On December 31, Nowak reported a net income of $82,000 for the year.

Prepare all the necessary journal entries for 2012 for (1) Chicory Cosmetics and (2) Frank, Inc.



Explanation

1.		Mar. 18		Cash	=	(297,300 x 15% x $14)	=	$624,330
		June 30		Dividend Revenue	=	($73,900 x 15%)	=	$11,085
		Dec. 31		Unrealized Gain or Loss—Equity	=	($713,520 – $624,330)	=	$89,190
2.		Jan. 1		Cash	=	(33,600 x 30% x $7)	=	$70,560
		June 15		Stock Investments	=	($28,800 x 30%)	=	$8,640
		Dec. 31		Revenue from Stock Investments	=	($82,000 x 30%)	=	$24,600