On January 2, 2013, Potomac Corporation bought 90% of Seine Company for $1,789,000. At the time of the acquisition, the balance in Seines common stock account was $1,000,000, and the balance in retained earnings was $900,000. The only differences between the fair value and book value of Ss assets were as follows:

Book Value Fair Value

Inventory $ 750,000 $ 765,000

Equipment (net) 1,200,000 1,230,000

Seines assets had an estimated useful life of 6 more years, and it used the FIFO inventory valuation method. During the next three years, Seine made $150,000 net income each year and paid $100,000 in dividends annually.

1. Use the information from the Potomac Exercise above.

A. Prepare the Computation and Allocation Schedule

B. Prepare the annual allocation, amortization, and depreciation of the diff between implied and book value

C. Prepare the eliminating/adjusting entries needed on the consolidated workpaper for the years ending 2013 and 2015, assuming the cost method.

2. Use the information from the Potomac Exercise above.

A. Prepare the entries on Ps books for 2013, assuming the use of the partial equity method.

B. Prepare the eliminating/adjusting entries needed on the consolidated workpaper for the years ending 2013 and 2015.