On January 1, 2013, Plymouth Corporation purchased an 80% interest in Salem Company for $1,200,000. A summary of Salem’s balance sheet on that date revealed the following:
Book Value Fair Value
Receivables $ 200,000 $ 200,000
Inventory 350,000 370,000
Equipment 500,000 650,000
Land 245,000 330,000
$ 1,295,000 $ 1,550,000
Liabilities $ 295,000
Common stock 500,000
Retained earnings 500,000
$ 1,295,000
The equipment had an original life of 20 years and has a remaining useful life of 10 years.
