Problem 3A-2 (LO 2, 6, 8) Equity method, later period, vertical worksheet, several excess adjustments. Booker Enterprises purchased an 80% interest in Kobe International for $850,000 on January 1, 20X5. Booker Enterprises also paid $4,000 in direct acquisition costs. On the purchase date, Kobe International had the following stockholders’ equity:

Common stock ($10 par) . . . . . . . . . . . . . . . . $150,000 Paid-in capital in excess of par . . . . . . . . . . . . 200,000 Retained earnings . . . . . . . . . . . . . . . . . . . . . 400,000

$750,000 Also on the purchase date, it was determined that Kobe International’s assets were understated as follows:

Equipment, 10-year remaining life . . . . . . . . . . $80,000 Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 Building, 20-year remaining life . . . . . . . . . . . . 60,000 The remaining excess of cost over book value was attributed to goodwill.

The following summarized statements of Booker Enterprises and Kobe International are for the year ended December 31, 20X7: