Allocation of Cost On January 1, 2003, Pam Company purchased an 85% interest in Shaw Company for $540,000. On this date, Shaw Company had common stock of $400,000 and retained earnings of $140,000. An examination ot Shaw Company’s assets and liabilities revealed that their book value was equal to their fair value except for marketable securities and equipment: LO2 Book Value Fair Value $ 45,000 140,000 $ 20,000 120,000 Marketable Securities Equipment (net)
Required:
A. Prepare a Computation and Allocation Schedule for the difference between cost and book value of equity acquired.
B. Determine the amounts at which the above assets (plus goodwill, if any) will appear on the consolidated balance sheet on January 1, 2003.