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GROUP CASE STUDY $-$ Post and Sage

EXHIBIT $1$: Calculation and amortization of acquisition differential

SPECIFIC INSTRUCTIONS: Only the BLUE CELLS will be marked. The black numbers are "CHECK FIGURES" to ensure you are

on the right track. Debits are to be shown as positive numbers and Credits are to be shown as negative numbers. Select

account names from drop$-$down boxes provided. If a cell is zero, insert a zero. If left blank and the correct answer is zero,

there will be no marks assigned.

Step $1$: Calculation, allocation, and changes to acquisition differential

Purchase: Cost of $70\%$ investment, January $1,$ Year $4$

Less: Book Value of Sage's net assets

Total shareholders' equity at book value

Acquisition differential

Adjust book value to fair value

Less Allocation of acquisition differential:

Balance $-$ goodwill

Step $2$: Amortization of the Acquisition Differential Schedule

Inventory

Warehouse $-$ see note A below

Goodwill

Note A $-$ Show the formula $($calculation$)$ for the annual warehouse amortization

using this format: amount$/$useful life. The response must show the math. Do

not include $$.$ Negative numbers are to be shown with a $-,$ ignore any commas.

For example, inventory would read: $-15000/1$