Allocation of Cost and Workpaper Entries On January 2, 2003, Page Corporation acquired a 90% interest in Salcedo Company for $3,500,000. At that time Salcedo Company had capital stock of $2,250,000 and retained earnings of $1,250,000. The book values of Salcedo Company’s assets and liabilities were equal to their fair values except for land and bonds payable. The land had a fair value of $200,000 and a book value of $120,000. The outstanding bonds were issued on January 1, 1998, at 9%
and mature on January 1, 2008. The bonds’ principal is $500,000, and the current yield rate on similar bonds is 6%. LO2 Required:
A. Assuming interest is paid annually, prepare a Computation and Allocation Schedule for the difference between cost and book value in the consolidated statements workpaper on the acquisition date.
B. Prepare the workpaper entries necessary on December 31, 2003, to allocate and depreciate the difference between cost and book value.