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Q1) Crane Mechanics obtained 75 percent of Downey Enterprises on March 31, 2005, for $3,645,000.

Downey's book value at that date totalled= $4,000,000. Appraisal values were larger than book values for identifiable assets in given amounts: Inventory ($300,000) and Plant and Equipment ($700,000). Purchase differential for Inventory is to be amortized over 5 months and Plant and Equipment over ten years. For remainder of 2005 Downey reports $635,000 of income and pays $100,000 in dividends. Following balances exist for Crane at December 31, 2005, and Downey at March 31 and December 31, 2005.









Plant and Equipment




Accumulated Depreciation




Investment in Downey












Total Debits








Common Stock




Additional Paid-In Capital




Retained Earnings








Extraordinary Gain From Acquisition of Downey




Investment Income 211,875 Total Credits




Make all worksheet eliminations in journal entry form essential to consolidate Crain and Downey at December 31, 2005.

Accounting Basics, Accounting

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