Valuing Investments

These are two independent situations: 1. Eusey Cosmetics acquired 12% of the 300,000 shares of common stock of High Fashion at a total cost of $14 per share on March 18, 2014. On June 30, High declared and paid a $75,000 dividend. On December 31, High reported net income of $244,000 for the year. At December 31, the market price of High Fashion was $16 per share. The stock is classified as available-for-sale.2. Dickson Inc. obtained significant influence over Kiner Corporation by buying 25% of Kiner’s 30,000 outstanding shares of common stock at a total cost of $11 per share on January 1, 2014. On June 15, Kiner declared and paid a cash dividend of $35,000. On December 31, Kiner reported a net income of $120,000 for the year.InstructionsPrepare all the necessary journal entries for 2014 for (a) Eusey Cosmetics and (b) Dickson Inc

The semi strong form of the efficient market hypothesis asserts that stock prices:

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a. Fully reflect all historical price information.

b. Fully reflect all publicly available information.c. Fully reflect all relevant information, including insider information.d. May be predictable.

 

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