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On January 1, 2020, Pharoah Corporation purchased 20% of the outstanding voting shares in WLT Corporation for $1,240,000. At the time of purchase, WLT's net assets were undervalued by $64,800 and had a remaining useful life of 12 years. Both companies had a December 31 year-end. At the end of 2020, WLT reported a net income of $338,000. Also, on December 31, 2020, the fair value of the investment in WLT shares was $1,369,000. On January 10, 2021, WLT paid a cash dividend. Pharoah's ownership entitles it to $32,800 of the dividend. Prepare the journal entries on the books of Pharoah Corporation to record the transactions described above, assuming that the 20% interest in WLT does represent significant influence. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.)

On January 1, 2020, Pharoah Corporation purchased 20% of the outstanding voting shares in WLT Corporation for $1,240,000. At the time of purchase, WLT's net assets were undervalued by $64,800 and had a remaining useful life of 12 years. Both companies had a December 31 year-end. At the end of 2020, WLT reported a net income of $338,000. Also, on December 31, 2020, the fair value of the investment in WLT shares was $1,369,000. On January 10, 2021, WLT paid a cash dividend. Pharoah's ownership entitles it to $32,800 of the dividend. Prepare the journal entries on the books of Pharoah Corporation to record the transactions described above, assuming that the 20% interest in WLT does represent significant influence. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.)

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On January 1, 2020, Pharoah Corporation purchased 20% of the outstanding voting shares in WLT Corporation for $1,240,000. At the time of purchase, WLT's net assets were undervalued by $64,800 and had a remaining useful life of 12 years. Both companies had a December 31 year-end. At the end of 2020, WLT reporteda net income of $338,000. Also, on December 31, 2020, the fair value of the investment in WLT shares was $1,369,000. On January 10, 2021, WLT paid a cash dividend. Pharoah's ownership entitles it to $32,800 of the dividend. Prepare the journal entries on the books of Pharoah Corporation to record the transactions described above, assuming that the 20% interest in WLT does represent significant influence. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Transcribed Image Text:On January 1, 2020, Pharoah Corporation purchased 20% of the outstanding voting shares in WLT Corporation for $1,240,000. At the time of purchase, WLT's net assets were undervalued by $64,800 and had a remaining useful life of 12 years. Both companies had a December 31 year-end. At the end of 2020, WLT reporteda net income of $338,000. Also, on December 31, 2020, the fair value of the investment in WLT shares was $1,369,000. On January 10, 2021, WLT paid a cash dividend. Pharoah's ownership entitles it to $32,800 of the dividend. Prepare the journal entries on the books of Pharoah Corporation to record the transactions described above, assuming that the 20% interest in WLT does represent significant influence. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Date Account Titles and Explanation Debit Credit (To record investment income) (To record amortization of fair value difference)
Transcribed Image Text:Date Account Titles and Explanation Debit Credit (To record investment income) (To record amortization of fair value difference)
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