Question: Fischer Corporation purchased 80 percent of the outstanding stock of Carp, Incorporated on January 1, 2015. The following information existed for Carp at the acquisition date.
Book Value Market Value
Cash& Receivables $50,000 $ 50,000
Inventory 190,000 220,000
Plant Assets (net) 420,000 600,000
Current Liabilities (40,000) (40,000)
Long-term Debt (250,000) (250,000)
Stockholders' Equity (370,000)
At the acquisition date, Fischer assigns a six-month amortization period to the inventory and a five-year amortization period to the plant assets.
Required: a. What is the amount of purchase differential amortization included in the calculation of Investment Income on Fischer's books in 2015 and 2016?
b. What amounts appear on the income statement portion of the 2015 consolidation worksheet with regard to the purchase differential amortizations?