On March 31, 2014, Wero CA purchased 30 percent interest in Javier CA by paying $450,000 cash. The book values of Javier CA’s assets and liabilities were equal to the fair values at the acquisition date, except for inventories that were overvalued by $100,000 and equipment (6-year remaining useful life) that was undervalued by $300,000. The shareholders’ equity of Javier CA, on January 1, was $1,200,000. Javier CA reported a net income of $100,000 for the year and declared a $50,000 dividend on July 1.

Required;                       

Prepare a schedule to allocate the investment fair values/book values differentials relating to Wero CA’s investment in Javier CA’s.

Answer rating: 100% (QA)

Investment cost 450000 Book value acquired 30 of 1225000 Excess cost over book value acquired 36750... View the full answer