1. Presented below are two independent situations.
1. Gambino Cosmetics acquired 10% of the 200,000 shares of common stock of Nevins Fashion at a total cost of $13 per share on March 18, 2015. On June 30, Nevins declared and paid a $60,000 dividend. On December 31, Nevins reported net income of $122,000 for the year. At December 31, the market price of Nevins Fashion was $15 per share. The stock is classi?ed as available-for-sale.
2. Kanza, Inc., obtained signi?cant in?uence over Rogan Corporation by buying 40% of Rogan's 30,000 outstanding shares of common stock at a total cost of $9 per share on January 1, 2015. On June 15, Rogan declared and paid a cash dividend of $30,000. On December 31, Rogan reported a net income of $80,000 for the year.
Instructions
Prepare all the necessary journal entries for 2015 for (a) Gambino Cosmetics and (b) Kanza, Inc.
2. Uttinger Company has the following data at December 31, 2015.
The available-for-sale securities are held as a long-term investment.
Instructions
a) Prepare the adjusting entries to report each class of securities at fair value.
b) Indicate the statement presentation of each class of securities and the related unrealized gain (loss) accounts.
Problems
3. The stockholders' equity accounts of Castle Corporation on January 1, 2015, were as follows.
Preferred Stock (8%, $50 par, cumulative, 10,000 shares authorized) $ 400,000
Common Stock ($1 stated value, 2,000,000 shares authorized) 1,000,000
Paid-in Capital in Excess of Par-Preferred Stock 100,000
Paid-in Capital in Excess of Stated Value-Common Stock 1,450,000
Retained Earnings 1,816,000
Treasury Stock (10,000 common shares) 50,000
During 2015, the corporation had the following transactions and events pertaining to its stockholders' equity.
Feb. 1 Issued 25,000 shares of common stock for $120,000.
Apr. 14 Sold 6,000 shares of treasury stock-common for $33,000.
Sept. 3 Issued 5,000 shares of common stock for a patent valued at $35,000.
Nov. 10 Purchased 1,000 shares of common stock for the treasury at a cost of $6,000.
Dec. 31 Determined that net income for the year was $452,000.
No dividends were declared during the year.
Instructions
a) Journalize the transactions and the closing entry for net income.
b) Enter the beginning balances in the accounts, and post the journal entries to the stockholders' equity accounts. (Use J5 for the posting reference.)
c) Prepare a stockholders' equity section at December 31, 2015, including the disclosure of the preferred dividends in arrears.
4. The following data, presented in alphabetical order, are taken from the records of Nieto Corporation.
The investment in Sasse common stock is considered to be a long-term available-for-sale security.
Instructions
Prepare a classi?ed balance sheet at December 31, 2015.