Plain Corporation Acquired a 75% Interest in Swampy Company on January

Essay

Plain Corporation acquired a 75% interest in Swampy Company on January 1, 2016, for $2,000,000. The book value and fair value of the assets and liabilities of Swampy Company on that date were as follows: The property and equipment had a remaining life of 6 years on January 1, 2016, and the deferred charge was being amortized over a period of 5 years from that date. Common stock was $1,500,000 and retained earnings was $900,000 on January 1, 2016. Plain Company records its investment in Swampy Company using the cost method.
Required:
Prepare, in general journal form, the December 31, 2016, workpaper entries necessary to:
A. Eliminate the investment account.
B. Allocate and amortize the difference between implied and book value.