Zippydah Company has the following data at December 31, 2012. Securities Cost Fair Value Trading $119,010 $125,370 Available-for-sale 103,870 91,090 The available-for-sale securities are held as a long-term investment. (a) Prepare the adjusting entries to report 1. Trading securities at fair value and 2. Available-for-sale securities at fair value.

Zippydah Company has the following data at December 31, 2012.

Securities		Cost		Fair Value
Trading		$119,010		$125,370
Available-for-sale		103,870		91,090

The available-for-sale securities are held as a long-term investment.

(a) Prepare the adjusting entries to report 1. Trading securities at fair value and 2. Available-for-sale securities at fair value.



Explanation
(a) (1) Market Adjustment-Trading ($125,370 – $119,010) = $6,360

(a) (2) Unrealized Gain or Loss-Equity ($103,870 – $91,090) = $12,780

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

On February 1, Minitori Company purchased 200 shares (2% ownership) of Becker Company common stock for $30 per share plus brokerage fees of $420. On March 20, Minitori Company sold 40 shares of Becker stock for $1,160, less a $31 brokerage fee. Minitori received a dividend of $2 per share on April 25. On June 15, Minitori sold 80 shares of Becker stock for $2,960, less a $51 brokerage fee. On July 28, Minitori received a dividend of $3 per share. Prepare the journal entries to record the transactions described above.

On February 1, Minitori Company purchased 200 shares (2% ownership) of Becker Company common stock for $30 per share plus brokerage fees of $420. On March 20, Minitori Company sold 40 shares of Becker stock for $1,160, less a $31 brokerage fee. Minitori received a dividend of $2 per share on April 25. On June 15, Minitori sold 80 shares of Becker stock for $2,960, less a $51 brokerage fee. On July 28, Minitori received a dividend of $3 per share.

Prepare the journal entries to record the transactions described above.



Explanation

February 1		Cash	=	[(200 x $30) + $420]	=	$6,420
March 20		Cash	=	($1,160 – $31)	=	$1,129
		Stock Investments	=	($6,420 x 40/200)	=	$1,284
April 25		Cash	=	(160 x $2)	=	$320
June 15		Cash	=	($2,960 – $51)	=	$2,909
		Stock Investments	=	($6,420 x 80/200)	=	$2,568
July 28		Cash	=	(80 x $3)	=	$240