P2-3 Bargain purchase acquisition Raj Ltd. issued 10,000 shares of $10 par common stock with a total market value of $800,000 to purchase 40 percent ownership of Akash Ltd. on January 1, 2014. Akash Ltd. had net assets of $2,250,000 at the beginning of the year. The information relating to the difference between book values and fair values of Akash Ltd. on January 1, 2014, is as follows (in thousands):

Book Value Fair Value Inventory $130,000 $150,000 Equipment-net (4 years useful life) 500,000 460,000 Notes Payable (Due in 8 years) 300,000 220,000 Akash Ltd. declared dividends of $160,000 on December 1 and reported $400,000 net income for the year.

REQuIRED 1. Prepare a schedule for allocating the investment cost over the book value/fair value of the interest acquired.

2. Prepare all necessary journal entries for Akash Ltd. in 2014.

3. Calculate the investment in Akash Ltd.’s balance at December 31, 2014.