Brian Construction Company has the following stockholders equity on January 1, 2015, the date on which Roller Company purchases an 80% interest in the common stock for $720,000:

8% cumulative preferred stock (5,000 shares, $100 par) $ 500,000

Common stock (40,000 shares, $20 par) 800,000

Retained earnings 200,000

Total stockholders equity $1,500,000

Brian Construction Company did not pay preferred dividends in 2014.

1. Prepare a determination and distribution of excess schedule. Assume that the preferred stocks liquidation value is equal to par and that any excess of cost is attributable to goodwill.

2. Assume Ace Construction has the following net income (loss) for 2015 and 2016 and does not pay any dividends:

2015 income $70,000

2016 income 40,000

Roller maintains its investment account under the cost method. Prepare the cost-to-equity conversion entries necessary on Roller Companys books to adjust its investment account to the simple equity balance as of January 1, 2017.