Hatcher Cosmetics acquired 10% of the 200,000

Price: $1.99


E17-12 (Journal Entries for Fair Value and Equity Methods) Presented below are two independent
situations.

Situation 1
Hatcher Cosmetics acquired 10% of the 200,000 shares of common stock of Ramirez Fashion at a total cost of $14 per share on March 18, 2012. On June 30, Ramirez declared and paid a $75,000 cash dividend. On December 31, Ramirez reported net income of $122,000 for the year. At December 31, the market price of Ramirez Fashion was $15 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 30,000 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 $36,000. On December 31, Nadal reported a net income of $85,000 for the year.

Instructions
Prepare all necessary journal entries in 2012 for both situations