Bonita cosmetics acquired 10% of the 218,000 shares of common stock of martinez fashion at a total cost of $13 per share on march 18, 2017. on june 30, martinez declared and paid $71,300 cash dividend to all stockholders. on december 31, martinez reported net income of $118,000 for the year. at december 31, the market price of martinez fashion was $14 per share. situation 2 windsor, inc. obtained significant influence over seles corporation by buying 30% of seles’s 32,300 outstanding shares of common stock at a total cost of $8 per share on january 1, 2017. on june 15, seles declared and paid cash dividends of $35,200. on december 31, seles reported a net income of $82,000 for the year.

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: 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.

Jun 30       Cash                                             Debit   $7,130

                                    Dividend Revenue    Credit                $7,130

Note: 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.

Securities Fair Value

Dec 31        Adjustment                      Debit     $21,800

                        Unrealized holding gain (loss)- Equity    Credit     $21,800

Note: 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.

Req. B Situation 2

Investment in Seles

Jan 1          Common stock of Seles Corp.     Debit      $77,520

                                       Cash                         Credit             $77,520

Note: 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.

Jun 15        Cash                                           Debit         $10,560

                            Dividend Revenue          Credit             $10,560

Note: 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.

                  Investment in Seles

Dec 31        Cash                   Debit          $24,600

                                    Revenue     Credit                       $24,600

Note: 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.

1   all nations face the problem of scarcity because there are limited resources and unlimited wants. nations do not have enough factors of production to produce everything that their population wants. entrepreneurial resources initiate businesses to make new goods and services; labor resources produce goods and services.

2 there are four factors of production: natural resources, labor resources, capital resources, and entrepreneurial resources. natural resources are raw materials from nature that are used to produce goods. trees, water, and grains are natural resources. some natural resources, such as wheat and cattle, are renewable

3 wants

things that you do not need to have in order to survive, but would like to have

needs

things that you must have in order to survive

goods

physical products

services

tasks that a business perform for customers

resources

items that people can use to make or obtain what they need or want

determine

to settle or decide by choice of alternatives or possiblities

4 i really dont know

answer; institution based;