Presented below are two independent situations.
1. Chicory Cosmetics acquired 15% of the 200,000 shares of common stock of Racine Fashion at a total cost of $13 per share on March 18, 2014. On June 30,Racine declared and paid a $60,000 dividend. On December 31,Racine reported net income of $122,000 for the year. At December 31, the market price of Racine Fashion was $15 per share. The stock is classified as non-trading.
2. Frank, Inc., obtained significant influence over Nowak Corporation by buying 30% of Nowak’s 30,000 outstanding shares of common stock at a total cost of $9 per share on January 1, 2014. On June 15, Nowak declared and paid a cash dividend of $30,000. On December 31, Nowak reported a net income of $80,000 for the year.
Prepare all the necessary journal entries for 2014 for (a) Chicory Cosmetics and (b) Frank, Inc. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)