On January 1, 2012, Adams acquires 100% of Baker in a transaction accounted for using the acquisition method. Adams will use equity accounting for its investment in Baker. Baker will remain a wholly owned subsidiary of Adams. The following is information about this acquisition.

To pay for this purchase, Adams issues 20,000 shares of common stock with a $5 par and $20 market value. Legal and accounting costs were $50,000. Stock issuance costs were $20,000. If Baker has net income of $50,000 in 2012, Adams will pay an additional $100,000. At acquisition date there is a 40% probability of this occurring.

The book value of net assets acquired of Baker was $200,000 at acquisition date. Adams was willing to pay in excess of book value to acquire Baker because Baker had a building (10 year life) with a book value of $300,000 and a fair value of $340,000.

Baker has $40,000 in net income in 2012 and pays a dividend of $30,000. Adams has $100,000 of net income in 2012 and pays a dividend of $70,000.

1. Prepare an investment analysis at date of acquisition, including the following:

Calculate the amount debited to the investment

Calculate the premium over book value

Determine the amount of goodwill or if it is a bargain purchase.

How much is the excess depreciation that will be reflected as consolidation entry E in 2012 ?

1. How much are consolidated dividends in 2012 ?

1. At December 31, 2014 assume Adams has Buildings with a book value of $500,000 and fair value of $600,000 and Baker has Buildings with a book value of $400,000 and a fair value of $450,000.

What is the CONSOLIDATED total for buildings at that date ?

Prepare journal entry A that will show up on the consolidated worksheet as of December 31, 2014.

1. How much is consolidated Equity Income in 2012.