Allocation of Cost Pace Company purchased 20,000 of the 25,000 shares of Saddler Corporation for $525,000.
On January 3, 2004, the acquisition date, Saddler Corporation’s capital stock and retained earnings account balances were $500,000 and $100,000, respectively. The following values were determined for Saddler Corporation on the date of purchase: LO2 Book Value Fair Value Inventory $ 50,000 $ 70,000 Other Current Assets 200,000 200,000 Marketable Securities 100,000 125,000 Plant and Equipment 300,000 330,000 Required:
A. Prepare the entry on the books of Pace Company to record its investment in Saddler Corporation.
B. Prepare a Computation and Allocation Schedule for the difference between the cost and book value in the consolidated statements workpaper.