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Fredo, Inc., purchased 10% of Sonny Enterprises for $1,000,000 on January 1, 2016. Sonny recognized...

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Accounting

Fredo, Inc., purchased 10% of Sonny Enterprises for $1,000,000 on January 1, 2016. Sonny recognized a total of $400,000 net income during 2016, paid $30,000 of dividends to Fredo during 2016, and at December 31, 2016, the market value of the Sonny investment increased to $1,040,000. Required: Prepare the journal entries necessary to account for the Sonny investment, assuming that Fredo accounts for that investment as (1) an available-for-sale investment, and (2) elects the fair-value option.

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