Presented below are two independent situations. 1. Chicory Cosmetics acquired 15% of the 200,000 ordinary shares of

Question:

Presented below are two independent situations.

1. Chicory Cosmetics acquired 15% of the 200,000 ordinary shares of Racine Fashion at a total cost of €13 per share on March 18, 2020. On June 30, Racine declared and paid a €60,000 dividend. On December 31, Racine reported net income of €122,000 for the year. At December 31, the market price of Racine Fashion was €15 per share. The shares are classified as non-trading.

2. Frank Ltd. obtained significant influence over Nowak Industries by buying 30% of Nowak’s 30,000 outstanding ordinary shares at a total cost of €9 per share on January 1, 2020. On June 15, Nowak declared and paid a cash dividend of €30,000. On December 31, Nowak reported a net income of €80,000 for the year.

Instructions
Prepare all the necessary journal entries for 2020 for (a) Chicory Cosmetics and (b) Frank Ltd.

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...

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