Porter Company purchased an 90% interest in the capital stock of Salem Company

On January 1, 2011, Porter Company purchased
an 90% interest in the capital stock of Salem Company for $850,000.

The
fair value of the noncontrolling interest was proportionate to the
consideration paid by the controlling interest.

At
that time, Salem Company had capital stock of $550,000 and retained earnings
of $80,000.

Differences
between the fair value and the book value of the identifiable assets of Salem
Company were as follows:

Under (Over) Valued

Equipment

120,000

Land

25,000

Inventory

40,000

In-Process
Research & Development
40,000

Bonds
payable

-10,000

The
book values of all other assets and liabilities of Salem Company were equal
to their fair values on January 1, 20011

The
inventory was sold in 2011 and the equipment has a 5-year remaining life as
of January 1, 2011.

The
bonds payable mature in 5 years from January 1, 2011

At
12/31/13, Salem owes Porter $25000

Required
for the year ended December 31, 2013:

1.
Prepare the analysis as of acquisition date including unamortized
differential at 1/1/11.

2.
Prepare the journal entries Porter recorded with respect to its investment in
Porter for the year ended 12/31/13.

Use
formulas in all calculations.

Clearly
label each part in the spreadsheet tab below

Do problem on “Additional Question” below for
20 points.