Question & Answer: INTERIM ACQUISITION :…..

INTERIM ACQUISITION :

On March 31, 2014, Wero CA purchased Javier CA’s 30 percent interest 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 years 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 net income of $100,000 for the year, and declared $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.