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Wildhorse Cosmetics acquired 15% of the 120,500 shares of common stock of Nevins Fashion at a total cost of $13 per share on March 18, 2020. On June 30, Nevins declared and paid a $67,900 dividend. On December 31, Nevins reported net income of $120,900 for the year. At December 31, the market price of Nevins Fashion was $15 per share.

Respuesta :

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Answer & Explanation:

Wildhorse Cosmetics:

Date                 Account Titles                               Debit ($) Credit  ($)

March 18, 2017 Available-for-sale securities

                               ( 120,500 x 15% x $ 13)           234,975  

                               Cash                                                   234,975

June 30, 2017 Cash ( $ 67,900 x 15%)           10,195  

                               Dividend revenue                                 10,195

December         Fair value adjustment

                               ( $ 2 x 18,075)                            36,150  

                               Other comprehensive income

                               -unrealized gain on available-

                               for sale securities                                  36,150

Note that

Fair-value adjustment = (current share price - previous share price) x 15% of                      total nevins shares

                                   =  ($15 - $13) x 15% of 120,500

                                   = $2 x 18,075 = 36,150