Presented below are two independent situations. Situation 1 People Tables acquired 15% of the 5,000,000 shares of

Question:

Presented below are two independent situations.

Situation 1

People Tables acquired 15% of the 5,000,000 shares of common stock of Robot Sofas at a total cost of $8.50 per share on April 1, 2014. On August 8, Robot Sofas declared and paid a $250,000 cash dividend. On December 31, Robot Sofas market price was $9.00 per share and the company reported net income of $685,000 for the year. The securities are classified as available-for-sale.

Situation 2

On January 1, 2014, Mica Company purchased 40% of Santos Corporation 500,000 outstanding shares of common stock at a total cost of $13 per share. On October 25, Santos declared and paid a cash dividend of $0.40 per share. On December 31, Santos reported a net income of $860,000 for the year and the market price of its common stock was $14 per share.

Instructions

Prepare all necessary journal entries in 2012 for both situations.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...