Exercise 17-12

The following are two independent situations.

Situation 1

Conchita Cosmetics acquired 10% of the200,000shares of common stock of Martinez Fashion at a total cost of $13per share on March 18, 2014. On June 30, Martinez declared and paid a $75,000cash dividend. On December 31, Martinez reported net income of $122,000for the year. At December 31, the market price of Martinez Fashion was $15per share. The securities are classified as available-for-sale.

Situation 2

Monica, Inc. obtained significant influence over Seles Corporation by buying30% of Seless30,000outstanding shares of common stock at a total cost of $9per share on January 1, 2014. On June 15, Seles declared and paid a cash dividend of $36,000. On December 31, Seles reported a net income of $85,000for the year.

Prepare all necessary journal entries in 2014 for both situations.