Problem 2 (40 points) On January 1, 2020, Pilsner Company acquired a 90% interest in Smalley Company for $3,600,000. On that date, Smalley Company had common stock of $800,000 and retained earnings of $2,800,000. The book values of assets and liabilities were equal to fair values except for the following: Book Value Fair Value Inventory $ 50,000 $ 56,000 Supplies 8,000 6,000 Salaries Payable 3,500 4,100 Equipment (net) 540,000 620,000 Land 300,000 460,000 The inventory was sold in 2020. The equipment had an estimated remaining useful life of 8 years. Pilsner Company uses the cost method to record its investment in Smalley Company. Required: Prepare all the workpaper entry to allocate, amortize, and depreciate the difference between implied and book value on: (a) 1/1/2020, (6) 12/31/2020 and (C) 12/31/2021. Problem 2 (40 points) On January 1, 2020, Pilsner Company acquired a 90% interest in Smalley Company for $3,600,000. On that date, Smalley Company had common stock of $800,000 and retained earnings of $2,800,000. The book values of assets and liabilities were equal to fair values except for the following: Book Value Fair Value Inventory $ 50,000 $ 56,000 Supplies 8,000 6,000 Salaries Payable 3,500 4,100 Equipment (net) 540,000 620,000 Land 300,000 460,000 The inventory was sold in 2020. The equipment had an estimated remaining useful life of 8 years. Pilsner Company uses the cost method to record its investment in Smalley Company. Required: Prepare all the workpaper entry to allocate, amortize, and depreciate the difference between implied and book value on: (a) 1/1/2020, (6) 12/31/2020 and (C) 12/31/2021