Washington Company purchased 100% of Jefferson Company on January 1, 20X1 for $1,000,000 when the book value of Jefferson was $750,000 with the excess caused by Equipment that was undervalued by $50,000 and Goodwill. The Equipment had a four year life. In 20x2 Washington sold inventory to Jefferson still in the inventory of Jefferson at year end with a profit of $3,000.During 20X3, Washington sold to Jefferson inventory costing $30,000 for $40,000.At December 31, 20x3, Jefferson still had $6,000 cost to Jefferson of that inventory in its inventory. Jefferson reported $50,000 of income in 20X3 and paid dividends of $10,000.

A. Prepare a schedule of Excess of Cost over Book Value on the date of purchase. Determine the annual amortization expense in this schedule.

B. For 20X3, prepare on the books of Washington the full equity method journal entries.

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A Prepare a schedule of Excess of Cost over ... View the full answer