On January 1, Year 2, Taylor Corp. acquired 100% of the outstanding shares of Toronto Inc. for a total cost of $226,000. The carrying amount and fair value of Toronto’s assets and liabilities on this date were as follows: 

On January 1, Year 2, the buildings and trademarks had an estimated useful life of ten and fifteen years, respectively. The long-term debt is due on December 31, Year 6. A goodwill impairment test in Year 4 indicated a value of $23,000 for Toronto’s goodwill. There were no other impairment losses. 

Required 

(a) Prepare a schedule of changes to the acquisition differential for each year from the date of acquisition to the end of Year 4. 

(b) Now assume that Taylor had only acquired 70% of the common shares of Toronto at a cost of $147,000. Briefly explain how this would change the amounts calculated in part (a).

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Cash and accounts receivable Inventory Buildings, net Trademarks Current liabilities Long-term debt Common shares Retained earnings Carrying Amount $125,000 30,000 175,000 $330,000 $ 50,000 190,000 10,000 80,000 $330,000 Fair Value $ 125,000 32,000 205,000 60,000 $422,000 $50,000 210,000