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