Porter Company purchased an 90% interest in the capital stock of Salem Company

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Description

On January 1, 2011, Porter Company purchased
an 90% interest in the capital stock of Salem Company for $850,000.
The
fair value of the noncontrolling interest was proportionate to the
consideration paid by the controlling interest.
At
that time, Salem Company had capital stock of $550,000 and retained earnings
of $80,000.
Differences
between the fair value and the book value of the identifiable assets of Salem
Company were as follows:
Under (Over) Valued
Equipment 120,000
Land 25,000
Inventory 40,000
In-Process
Research & Development
40,000
Bonds
payable
-10,000
The
book values of all other assets and liabilities of Salem Company were equal
to their fair values on January 1, 20011
The
inventory was sold in 2011 and the equipment has a 5-year remaining life as
of January 1, 2011.
The
bonds payable mature in 5 years from January 1, 2011
At
12/31/13, Salem owes Porter $25000
Required
for the year ended December 31, 2013:
1.
Prepare the analysis as of acquisition date including unamortized
differential at 1/1/11.
2.
Prepare the journal entries Porter recorded with respect to its investment in
Porter for the year ended 12/31/13.
Use
formulas in all calculations.
Clearly
label each part in the spreadsheet tab below
Do problem on “Additional Question” below for
20 points.

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