Answer:
See explanation section
Explanation:
Req. A: Situation 1
Mar 18 Available for sale of stocks of MF Debit $283,400
Cash Credit $283,400
Note: <em>As Bonita acquired 10% of Martinez shares at $13, total cash has to be paid to Martinez Fashion = (218,000*10%) × $13 = 21,800 shares × $13 = $283,400.</em>
Jun 30 Cash Debit $7,130
Dividend Revenue Credit $7,130
Note: <em>As Martinez declared $71,300 to all stockholders, Bonita will receive 10% of those dividends as they acquired 10% of the total stocks. The cash received from the MF is = $71,300 × 10% = $7,130.</em>
Securities Fair Value
Dec 31 Adjustment Debit $21,800
Unrealized holding gain (loss)- Equity Credit $21,800
Note: <em>As the market price of the share increased to $14-$13 = $1, Bonita would gain from the increased market price. Total gain = $1 × (218,000 shares × 10%) = $21,800.</em>
Req. B Situation 2
Investment in Seles
Jan 1 Common stock of Seles Corp. Debit $77,520
Cash Credit $77,520
Note: <em>As Windsor, Inc. obtained 30% of Martinez shares at $8, total cash has to be paid to Martinez Fashion = (32,300*30%) × $8 = 9,690 shares × $8 = $77,520.</em>
Jun 15 Cash Debit $10,560
Dividend Revenue Credit $10,560
Note: <em>As Seles declared $32,300 to all stockholders, Windsor, Inc. will receive 30% of those dividends as they acquired 30% of the total stocks. The cash received from the MF is = $32,300 × 30% = $10,560.</em>
Investment in Seles
Dec 31 Cash Debit $24,600
Revenue Credit $24,600
Note: <em>As Seles reported a net income of $82,000, due to acquiring 30% of Seles stock, Windsor, Inc. will receive 30% of its net income. The revenue is = $82,000 × 30% = $24,600.</em>
