EXERCISE 5-3

Allocation of Cost LO 2

Pace Company purchased 20,000 of the 25,000 shares of Saddler Corporation for $525,000. On January 3, 2019, the acquisition date, Saddler Corporations 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:

	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:

1. Prepare the entry on the books of Pace Company to record its investment in Saddler Corporation.
2. Prepare a Computation and Allocation Schedule for the difference between book value and the value implied by the purchase price in the consolidated statements workpaper.