Chapter 1: 33

33
Step 1. Purchase Price 770,000
Acquisition Rate 30%

Investment in Q-Video 770,000

Cash 770,000

Step 2. Purchase Price 770,000

Book Value at 30% 570,000
Excess Net Asset 200,000

Step 3. Customer List 300,000

Ownership Rate 30%
Excess Payment Remaining 90,000

Total Excess Payment 200,000

Excess Payment Identified with Specific Asset 90,000
Goodwill 110,000

Step 4. Cusomer List 90,000

Useful Life (in years) 5
18,000

Equity in Q-Video Income 18,000

Investment in Q-Video 18,000

Step 5. Investment in Q-Video 75,000

Equity in Q-Video Income 75,000

Step 6. Amount of Inventory Remaining 80,000

Gross Profit Percentage 38%
Unearned Profit 30,000
Harper's Percentage of Ownership 30%
Amount of Adjustment 9,000

Investment in Q-Video 9,000

Equity in Q-Video Income 9,000

Step 7. Amount of Inventory Remaining 75,000

Gross Profit Percentage 20%
Unearned Profit 15,000
Harper's Percentage of Ownership 30%
Amount of Adjustment 4,500

Equity in Q-Video Income 4,500

Investment in Q-Video 4,500
Step 8. Equity in Q-Video Loss 30,000
Investment in Q-Video 30,000

Step 9. Cash 4,500

Investment in Q-Video 4,500

Step 10. 2014 Equity

75,000
18,000
9,000
48,000

2015 Equity
9,000
4,500
30,000
18,000
(43,500)