Exercise 5-4

On January 1, 2015, Porter Company purchased an 80% interest in Salem Company for $256,900. On this date, Salem Company had common stock of $210,300 and retained earnings of $128,400. An examination of Salem Companys balance sheet revealed the following comparisons between book and fair values:

		Book Value		Fair Value
Inventory		$29,600		$34,800
Other current assets		50,100		55,100
Equipment		303,400		347,200
Land		196,800		196,800

(b)

Prepare the January 1, 2015, consolidated financial statements workpaper entries to eliminate the investment account and to allocate the difference between book value and the value implied by the purchase price. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)