addition , the chief accountant of Capriati told you that Capriati Corporation plans to hold these securities for the long term but may sell them in order to earn profits from appreciation in prices .
Question 12 ( Journal Entries for Fair Value and Equity Methods ) Presented below are two independent situations . Prepare all necessary journal entries in 2012 for each situation . Situation 1
Hatcher Cosmetics acquired 10 % of the 207,400 shares of common stock of Ramirez Fashion at a total cost of $ 15 per share on March 18 , 2012 . On June 30 , Ramirez declared and paid a $ 80,200 cash dividend . On December 31 , Ramirez reported net income of $ 123,500 for the year . At December 31 , the market price of Ramirez Fashion was $ 18 per share . The securities are classified as available-for-sale .
Situation 2
Holmes , Inc . obtained significant influence over Nadal Corporation by buying 25 % of Nadal ‟ s 30,800 outstanding shares of common stock at a total cost of $ 9 per share on January 1 , 2012 . On June 15 , Nadal declared and paid a cash dividend of $ 43,800 . On December 31 , Nadal reported a net income of $ 90,500 for the year .
Question 13 ( Equity Method )
Gator Co . invested $ 1,380,000 in Demo Co . for 25 % of its outstanding stock . Demo Co . pays out 40 % of net income in dividends each year .
Use the information in the following T-account for the investment in Demo to answer the following questions .
Question 14