Chapter 9
Investments
445
AP-9A
(
3
)
On May 1, 2016, Xiao Company, a public company, acquired 210,000 of the 600,000
outstanding common shares from Zahra Company for a total of $1,680,000. This investment
is part of Xiao Company’s long-term business diversification plan. Xiao Company’s year-end is
December 31. During 2016, the following investment activities occurred.
1) Zahra Company recorded an annual net income of $908,000 for its 2015–2016 fiscal year-
end of June 30, 2016.
2) Zahra Company paid a cash dividend of $300,000 on July 30, 2016.
Required
a) Prepare journal entries to record the acquisition of the 210,000 common shares by Xiao
Company.
b) Prepare journal entries to record revenue of investment from Zahra Company on June 30,
2016.
c) Prepare journal entries to record the receipt of cash dividends on July 30, 2016.
Date
Account Title and Explanation
Debit
Credit
