Stilt Corporation purchased a 40% interest in the common stock of Shallow Company for $2,660,000 on January 1, 2013, when the book value of Shallow's net equity was $6,000,000. Shallow's book values equaled their fair values except for the following items:

Book Fair
Value Value Difference
Inventories $450,000 $500,000 $ 50,000
Land 100,000 450,000 350,000
Building-net 400,000 200,000 (200,000 )
Equipment-net 350,000 400,000 50,000

Required:
Prepare a schedule to allocate any excess purchase cost to identifiable assets and goodwill.
What will be an ideal response?

Cost of Stilt's 40% investment in Shallow $2,660,000
Less: Book value of net assets acquired:
40% × $6,000,000 of net equity = 2,400,000
Excess cost over book value acquired = $ 260,000

Schedule to Allocate Cost-Book Value Differentials

Fair value - Amount
Book value Interest Assigned
Inventories $50,000 × 40% $20,000
Land 350,000 × 40% 140,000
Building-net (200,000) × 40% (80,000)
Equipment-net 50,000 × 40% 20,000
Excess allocated to specific assets and liabilities $100,000
Excess allocated to goodwill $160,000
Calculated excess of cost over book value $260,000