Allocation schedule and computations (excess cost over fair value) John Corporation acquired a 70…

Allocation schedule and computations (excess cost over fair value)  John Corporation acquired a 70 percent interest in Jojo Corporation on April 1, 2011, when it purchased 14,000 of Jojo’s 20,000 outstanding shares in the open market at $13 per share. Additional costs of acquiring the shares consisted of $10,000 legal and consulting fees. Jojo Corporation’s balance sheets on January 1 and April 1, 2011, are summarized as follows (in thousands):  January 1 (per books) April 1 (per books) April 1 (fair values)  Cash $ 40 $ 45 $ 45  Inventories 35 60 50  Other
» Allocation schedule and computations (excess cost over fair value)  John Corporation acquired a 70 percent interest in Jojo Corporation on April 1, 2011, when it purchased 14,000 of Jojo’s 20,000 outstanding shares in the open market at $13 per share. Additional costs of acquiring the shares consisted of $10,000 legal and consulting fees. Jojo Corporation’s balance sheets on January 1 and April 1, 2011, are summarized as follows (in thousands):  January 1 (per books) April 1 (per books) April 1 (fair values)  Cash $ 40 $ 45 $ 45  Inventories 35 60 50  Other current assets 25 20 20  Land 30 30 50  Equipment—net 100 95 135  Total assets $230 $250 $300  Accounts payable $ 45 $ 40 $ 40  Other liabilities 15 20 20  Capital stock, $5 par 100 100  Retained earnings January 1 70 70  Current earnings 20  Total liabilities and equity $230 $250  A D D I T I O N A L I N F O R M A T I O N 1. The overvalued inventory items were sold in September 2011. 2. The undervalued items of equipment had a remaining useful life of four years on April 1, 2011. 3. Jojo’s net income for 2011 was $80,000 ($60,000 from April to December 31, 2011). 4. On December 1, 2011, Jojo declared dividends of $2 per share, payable on January 10, 2012. 5. Any unidentified assets of Jojo are not amortized. REQUIRED 1. Prepare a schedule showing how the difference between John’s investment cost and book value acquired should be allocated to identifiable and/or unidentifiable assets. 2. Calculate John’s investment income from Jojo for 2011. 3. Determine the correct balance of John’s Investment in Jojo account at December 31, 2011.

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