On January 1, 2016, Jones Company acquires a 30% interest in Fink Company by purchasing 3,000...
On January 1, 2016, Jones Company acquires a 30% interest in Fink Company by purchasing 3,000 of its 10,000 common shares for $16 per share and obtains significant influence. On the date of acquisition, the net assets of Fink were as shown here:
|
Book Value |
Fair Value |
|
| Non-depreciable assets (for example, land) | $15,000 | $25,000 |
| Depreciable assets (10-year remaining life) | 90,000 | 115,000 |
| $105,000 | $140,000 | |
| Liabilities | $10,000 | $15,000 |
During 2016, Fink earned income of $22,000 and paid dividends of $6,000.
Required:
|
Prepare all journal entries on Jones’s books to record the acquisition, dividends, and income from the investment in Fink. If you can, can you please explain in detail. |
Homework Answers
Acquisition price = 3000 * $16 = $48000
Percent of Acquisition = 3000/10000 = 0.3 i.e. 30%
| Journal entries | |
| Particulars | Amount in $ |
| DR: Investment in Fink Account | 48000 |
| CR: Cash | 48000 |
| (Being 3000 shares of Fink Company purchased @ $16 per share) | |
| DR: Investment in Fink Account (22000*30%) | 6600 |
| CR: Share of Income from Investment in Fink Company | 6600 |
| (Being Share of Income from Investment in Fink company recorded and added to Investment) | |
| DR: Cash | 1800 |
| CR: Investment in Fink Account (6000*30%) | 1800 |
| (Being Dividend received reduced from Investment) |
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