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    King Incorporated

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    On January 1, 2004, baker, Inc. purchased 40 percent of the outstanding stock of King, Inc. for $1.5 million. The book value of the net assets of net assets of King, Inc. on that date was $3.0 million. The market values of the accounts comprising net assets were equal to their book values, except for the following:

    Book Value Market Value
    Equipment $250,000 $200,000
    Building $650,000 $800,000
    Notes payable $250,000 $220,000

    Calculate the purchase differential and prepare a schedule showing its allocation to specific assets and liability accounts.

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    Solution Preview

    Purchase differential is: (200,000 - 250,000) + (800,000 - 650,000) ...

    Solution Summary

    This solution contains calculations to aid you in understanding the solution to this question about market values.