On January 1, 2010, Porter Company purchased an 80% interest in the capital stock of Salem Company for $850,000. At that time, Salem Company had capital stock of $550,000 an retained earnings of $80,000. Differences between the fair value and the book value of the identifiable assets of Salem Company were as follows: Fair Value in Excess of Book Value Equipment............. $130,000 Land............. 65,000 Inventory............. 40,000 The book values of all other assets and liabilities of Salem Company were equal to their fair values on January 1, 2010. The equipment had a remaining life of five years on January 1, 2010. The inventory was sold in 2010.

Salem Companys net income and dividends declared in 2010 and 2011 were as follows: Year 2010 Net Income of $100,000; Dividends Declared of $25,000 Year 2011 Net Income of $110,000; Dividends Declared of $35,000

Required:

A. Prepare a Computation and Allocation Schedule for the difference between book value of equity acquired and the value implied by the purchase price.

B. Present the eliminating/adjusting entries needed on the consolidated worksheet for the year ended December 31, 2010. (It is not necessary to prepare the worksheet.) 1. Assume the use of the cost method. 2. Assume the use of the partial equity method. 3. Assume the use of the complete equity method.

C. Present the eliminating/adjusting entries needed on the consolidated worksheet for the year ended December 31, 2011.