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Ahmad Corporation paid $350,000 for a 30 percent interest in Fakhry Corporation on July 1, 2016,...
Ahmad Corporation paid $350,000 for a 30 percent interest in Fakhry Corporation on July 1, 2016, when Fakhry Corporation’s common stock was at $350,000 and retained earnings at $150,000. In 2016, Fakhry declared and paid dividends of $20,000 each on March 1 and September 1. Fakhry’s income for 2016 is summarized below: Income before extraordinary item $80,000 Extraordinary gains, December 2016 20,000 Net income $100,000 Fakhry’s assets and liabilities were stated at fair values on July 1, 2016, except for land that was undervalued by $25,000 and equipment with a five-year remaining useful life that was undervalued by $50,000. >Prepare all the journal entries (other than closing entries) on the books of Ahmad Corporation during 2016 to account for the investment in Fakhry!
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| Date | Accounts title | Debit | Credit |
| July 1, 2016 | Investment in in Fakhry Corporation | $ 350,000 | |
| Cash | $ 350,000 | ||
| (To record Purchase of Investment.) | |||
| Sep 1, 2016 | Cash | $ 6,000 | |
| Investment in in Fakhry Corporation | $ 6,000 | ||
| (To record Dividend Received.) (20000*30%) | |||
| Dec 31, 2016 | Investment in in Fakhry Corporation (100000*30%) | $ 30,000 | |
| Income from equity investment | $ 30,000 | ||
| (To record Income from Equity Investment.) | |||
| Dec 31, 2016 | Income from equity investment (10000*30%) | $ 3,000 | |
| Investment in in Fakhry Corporation | $ 3,000 | ||
| (To record Amortization of equipment.) (50000/5=10000) |
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