Prime Company acquired 75%

of the common stock of Second Company January 1, year one, for $450,000

The consideration given was proportional to Second's fair value.

On that date, Second had the following trial balance:

account debit credit

Additional paid in capital $100,000

Building (12-year life) $250,000

Common stock 170,000

Current assets 170,000

Equipment (6-yr life) 160,000

Land 110,000

Liabilities (due in 4 years) 300,000

Retained earnings 1/year 1 120,000

Totals $690,000 $690,000

During year one, Second reported net income of $60,000

During year one, Sonny paid dividends of $30,000

During year two, Second reported net income of $80,000

During year two, Sonny paid dividends of $40,000

On January 1, year one, fair values were:

Land $146,000

Building $262,000

Equipment $184,000

There was no impairment of any goodwill arising from the acquisition.