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On January 4, 2011, Bailey Corp. purchased 40% of the voting common stock of Emery Co., paying $3,000,000. Bailey properly accounts for this investment using the equity method. At the time of the investment, Emery's total stockholders' equity was $5,000,000. Bailey gathered the following information about Emery's assets and liabilities whose book values and fair values differed:

Building(20 years life),book value:1,000,000. Fair value:1,800,000.

Equipment(5 years life),book value:1,500,000. Fair value:2,000,000.

Franchise(10 years life), book value:0. Fair value:700,000.

What is the amount of the excess of purchase price over book value?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M956783

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