Ahmad Corporation acquired 30 percent of interest in Fakhry Corporation for $350,000 on 1 July
2016 when Fakhry Corporation’s common stock was at $350,000 and retained earnings at $150,000.
Some information is given:
a. Fakhry’s income in 2016:
Income before extraordinary item $80,000
Extraordinary gains, December 2016 20,000
Net Income $100,000
b. Fakhry declared and paid dividends on 1 March and 1 September of $20,000 each in 2016
c. All net assets on 1 July 2016 were stated at fair values except land was undervalued by
$25,000 and equipment with a remaining five-year useful life was undervalued by $50,000