On January 1, Year 7, the Vine Company purchased 60,000 of the 80,000 ordinary shares of the Devine Company for $80 per share. On that date, Devine had ordinary shares of $3,500,000, and retained earnings of $2,140,000. When acquired, Devine had inventories with fair values $60,000 less than carrying amount, a parcel of land with a fair value $240,000 greater than the carrying amount, and equipment with a fair value $240,000 less than carrying amount. There were also internally generated patents with an estimated market value of $440,000 and a five-year remaining life. A long-term liability had a market value $140,000 greater than carrying amount; this liability was paid off December 31, Year 10. All other identifiable assets and liabilities of Devine had fair values equal to their carrying amounts. Devines accumulated depreciation on the plant and equipment was $540,000 at the date of acquisition.

The year 11 financial statements for Vine and Devine were as follows:

Additional Information

• At the acquisition date, the equipment had an expected remaining useful life of ten years. Both companies use the straight-line method for all depreciation and amortization calculations and the FIFO inventory cost flow assumption. Assume a 40% income tax rate on all applicable items and that there were no impairment losses for goodwill.
• On September 1, Year 11, Devine sold a parcel of land to Vine and recorded a total non-operating gain of $440,000.
• Sales of finished goods from Vine to Devine totalled $1,040,000 in Year 10 and $2,040,000 in Year 11. These sales were priced to provide a gross profit margin on selling price of 33.33% to the Vine Company. Devines December 31, Year 10, inventory contained $312,000 of these sales; December 31, Year 11, inventory contained $612,000 of these sales.
• Sales of finished goods from Devine to Vine were $840,000 in Year 10 and $1,240,000 in Year 11. These sales were priced to provide a gross profit margin on selling price of 40% to the Devine Company. Vines December 31, Year 10, inventory contained $140,000 of these sales; the December 31, Year 11, inventory contained $540,000 of these sales.
• Vines investment in Devines account is carried in accordance with the cost method and includes advances to Devine of $240,000, which are also included in current liabilities.
• There are no intercompany amounts other than those noted, except for the dividends of $500,000 (total amount) declared and paid by Devine.

Required:

(a) The allocation of the acquisition cost at acquisition and the related changes to acquisition differential schedule. (Leave no cells blank - be certain to enter "0" wherever required. Enter your answers in dollars, not in thousands of dollars. Input all values as positive numbers. Do not round gross profit percentage for intermediate computations. Omit $ sign in your response.)

HOW DO U FIDN THE BALANCE: GOODWILL?

INCOME STATEMENTS For year ending December 31, Year 11 (in thousands of dollars) Vine Sales $12,400 Dividends, investment income and gains 1,200 Total income 13,600 Cost of goods sold 9,200 Other expenses 500 Income taxes 200 Total expenses (9,900) Profit $ 3,700 Devine $ 3,800 1,800 5,600 2,300 500 200 (3,000) $ 2,600 Devine $ 2,500 12,600 (4,200) STATEMENTS OF FINANCIAL POSITION December 31, Year 11 (in thousands of dollars) Vine Land $ 6,000 Plant and equipment 19,600 Accumulated depreciation (5,000) Investment in Devine, cost 5,040 Inventories 5,400 Cash and current receivables 1,700 Total assets $32, 740 Ordinary shares $10,000 Retained earnings 11,200 Long-term liabilities 7,400 Deferred income taxes 1,000 Current liabilities 3,140 Total equity and liabilities $32,740 3,200 1,100 $15, 200 $ 3,500 6,200 1,900 100 3,500 $15, 200 $ 480000 Acquisition cost Allocation Acquisition January 1, Year 7 Cost Implied value of 100% investment Current Assets : Ordinary Shares $ 350000 Retained Earnings 2140000 640000 564000 Acquisition differential $ 760000 Life 1 10 Allocation: Inventory Land Equipment Patents Long - term Liability Subtotal Balance: Goodwill 60000 Cr 240000 Dr 240000 Cr 440000 Dr 140000 Cr 240000 Dr 5 4 Dr Dr