Interim acquisition On March 31, 2014, Wero CA purchased 30 percent interest in Javier CA 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-year 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 1. Prepare a schedule to allocate the investment fair value/book value differentials relating to Wero CA’s investment in Javier CA.

2. Prepare all necessary journal entries for Wero CA in 2014.

3. Determine investment in Javier CA balance at December 31, 2014.