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