On January 1, 2023, Pam Company purchased an 85% interest in Shaw Company for $540,000. On this date, Shaw Company had common stock of $400,000 and retained earnings of $140,000. An examination of Shaw Company’s assets and liabilities revealed that their book value was equal to their fair value except for marketable securities and equipment:

Required:
A. Prepare a Computation and Allocation Schedule for the difference between book value of equity acquired and the value implied by the purchase price.
B. Determine the amounts at which the above assets (plus goodwill, if any) will appear on the consolidated balance sheet on January 1, 2023.

Transcribed Image Text:

Marketable securities Equipment (net) Book Value $ 20,000 120,000 Fair Value $ 45,000 140,000