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Apple Corporation paid $1,900,000 for a 35% interest in Pie Corporation's outstanding voting stock on January 1, 2018. The book Values and Fair Values of Pie's assets and liabilities on January 1, along with amortization information are as follows (In thousands). Book Value Fair Value Difference Cash 500 500 0 Account's receivables - net (received in current year) 700 710 10 Inventories (sold in 2018) 1000 1200 200 Other current assets 210 210 Land 1000 1400 400 Buildings - net (10 year remaining life) 1700 1900 200 Equipment-net (5 year remaining life) 1200 750 450 Total Assets 6310 6670 360 10 860 180 1200 200 Accounts payable (paid in current year.) Other current liabilities Bond's payable (due December 1, 2022) Capital stock, $10 par Retained Earnings Total Liabilities and S/E 850 180 1000 3000 1280 6310 Pie corporation reported net income of $1,400,000 for 2018 and paid dividends of $575,000. Required 1. Perform the Preliminary Calculation to determine the excess of fair value over book value for the initial investment in Washington 2 Prepare a schedule to assign the excess of cost over book value - see the slide titled "Cost/Book Value Assignment". 3. Prepare an Amortization Schedule for the cost/book value differences similar to the one in the power point presentation. See the slide "Amortization and Investment Income". 4. Calculate the total income from Pie for 2018. 5. Calculate the balance in the "Investment in Pie" account at December 31, 2018. 1 Preliminary Calculation Investment cost of 35% interest Book Value Acquired Cost over book value Check figure is 402 2 Schedule to Assign Cost/Book Value Differences Amortization Period Assigned to Amount 3 Amortization Schedule Cost/book value differences 1st year Unamortized amortizati excess at year- on end Initial Amount 0 o O check figure-unamortized excess at year-end will be 370.5 4 Total Income from Pie for 2018 Share of Pie's Income Less: Amortizations Income from Pie 5 Balance in the Investment in Pie" account at December 31, 2018 Investment cost Add: Income from Pie Less: Dividends Investment balance at December 31, 2018 0 check figure 2157.25

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