Presented below are two independent situations.

Situation 1: Hatcher Cosmetics acquired 10% of the 200,000 ordinary shares of Ramirez Fashion at a total cost of $14 per share on March 18, 2022. 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 investment is classified as trading.

Situation 2: Holmes, Inc. obtained significant influence over Nadal Corporation by buying 25% of Nadal’s 30,000 outstanding ordinary shares at a total cost of $9 per share on January 1, 2022. 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 2022 for both situations.