On January 1, 2013, Plymouth Corporation purchased an 80% interest in Salem Company for $1,200,000. A summary of Salems balance sheet on that date revealed the following:

	Book Value	Fair Value
Receivables	$200,000	200,000
Inventory	350,000	370,000
Equipment	500,000	650,000
Land	245,000	330,000
	$ 1,295,000	$1,550,000
Liabilities	$295,000
Common stock	500,000
Retained earnings	$1,295,000

The equipment had an original life of 20 years and has a remaining useful life of 10 years.

A. Calculate the difference between implied and book value

B. Determine the allocation of the difference between implied and book value

Allocation of Difference Between Implied and Book Value
Asset/Liability	Fair Value	Book Value	Difference
Receivables
Inventory
Equipment
Land
Excess of FV over BV
Difference between implied and book value
Goodwill

C. For the December 31, 2013, prepare the workpaper entry to assign, amortize, and depreciate the difference between implied and book value

To allocate, amortize and depreciate the difference between implied and book value