Amgen Corporation purchased a 40% interest in the common stock of J&J Company fo

Question

Amgen Corporation purchased a 40% interest in the common stock of J&J Company for $2,660,000 on January 1, 2005, when the book value of J&J net equity was $6,000,000. Shallow’s book values equaled their fair values except for the following items: Book Fair Value Value Difference Inventories $450,000 $500,000 $50,000 Land 100,000 450,000 350,000 Building-net 400,000 400,000 0 Equipment-net 350,000 400,000 50,000 $1,300,000 $1,750,000 $450,000 Required: Prepare a schedule to allocate any excess purchase cost to identifiable assets Amgen Corporation purchased a 40% interest in the common stock of J&J Company for $2,660,000 on January 1, 2005, when the book value of J&J net equity was $6,000,000. Shallow’s book values equaled their fair values except for the following items: Book Fair Value Value Difference Inventories $450,000 $500,000 $50,000 Land 100,000 450,000 350,000 Building-net 400,000 400,000 0 Equipment-net 350,000 400,000 50,000 $1,300,000 $1,750,000 $450,000 Required: Prepare a schedule to allocate any excess purchase cost to identifiable assets

Explanation / Answer

Investment cost = $ 2,660,000

Book value acquired( $6,000,000 x 40%) =$ 2,400,000

Excess cost over book value acquired   =   $ 260,000

Schedule to allocate any excess purchase cost to identifiable assets

Fair values Book values Diff Interest(Diif*40%) 500000 450000 50000 20000 450000 100000 350000 140000 400000 400000 0 0 400000 350000 50000 20000 Allocated to identifiable assets 180000 Excess cost over book value acquired    266000 Remainder allocated to goodwill(260000-180000) 86000

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