Answer:
See the explanation below
Explanation:
(a) Gambino Cosmetics
Since Gambino Cosmetics just 15% which is less than 20% of Nevins Fashion, the cost method for accounting for investments is the relevant method that is used as follows:
Stock investment = 10% * 200,000 * $13 = $260,000
Dividend income = 10% * $60,000 = $6,000
Available-for-sale (AFS) reserve = 10% * $122,000 = $12,000
<u>
Date Details Dr ($) Cr ($) </u>
08 Mar. ‘15 Stock investments 260,000
Cash 260,000
<em><u> To record investment in Nevins Fashion </u></em>
30 Jun. ‘15 Cash 6,000
Dividend income 6,000
<em><u> To record dividend income from investment in Nevins Fashion
</u></em>
31 Dec. ’15 Stock investments 12,000
AFS Reserve 12,000
<u><em> To record share of income in Nevins Fashion </em></u>
(b) Kanza, Inc.,
Since Kanza, Inc. acquired 40% in Rogan Corporation which is greater than 20%, the equity method for accounting for investments is the relevant method that is used as follows:
Stock investment = 40% * 30,000 * $9 = $108,000
Dividend income = 40% * $30,000 = $12,000
Investment revenue = 40% * $80,000 = $32,000
<u>Date Details Dr ($) Cr ($)
</u>
01 Jan. ‘15 Stock investments 108,000
Cash 108,000
<em><u> To record investment in Rogan Corporation </u></em>
15 Jun. ‘15 Cash 12,000
Stock investment 12,000
<em><u>To record dividend received from investment in Rogan Corporation
</u></em>
31 Dec. ’15 Stock investments 32,000
Investment revenue 32,000
<em><u> To record share of income in Rogan Corporation
</u></em>
