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:

a.Calculate the amount debited to the investment

b.Calculate the premium over book value

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

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

2.How much are consolidated dividends in 2012 ?