Reference no: EM132462224
Allen Company acquired 100 percent of Bradford Company's voting stock on January 1, 2014, by issuing 10,000 shares of its $10 par value common stock (having a fair value of $19.5 per share). As of that date, Bradford had stockholders' equity totaling $145,450. Land shown on Bradford's accounting records was undervalued by $10,700. Equipment (with a five-year remaining life) was undervalued by $6,850. A secret formula developed by Bradford was appraised at $32,000 with an estimated life of 20 years.
- Following are the separate financial statements for the two companies for the year ending December 31, 2018. There were no intra-entity payables on that date. Credit balances are indicated by parentheses.
Allen Company Bradford Company
Revenues (653,000) (212,500)
Cost of Goods Sold 216,000 79,000
Depreciation Expense 135,000 60,900
Subsidiary Earnings (69,300) 0
Net Income (371,630) (72,600)
Retained Earnings 1/1/18 (792,000) (105,000)
Net income (above) (371,630) (72,600)
Dividends Declared 175,500 40,000
Retained Earnings 12/31/18 (988,130) (137,600)
Current Assets 454,000 99,000
Investment in Bradford Company 237,300 0
Land 430,000 66,600
Buildings & Equipment (net) 814,000 182,000
Total Assets 1,935,300 347,600
Current Liabilities (257,170) (145,000)
Common Stock (600,000) (60,000)
Additional Paid-in-Capital (90,000) (5,000)
Retained Earnings 12/31/18 (988,130) (137,600)
Total Liabilities and Equity (1,935,300) (347,600)
Question a-1. Complete the table to show the allocation of the fair value in excess of book value.
Question a-2. What balance will Allen show in its Subsidiary Earnings account?
Question b. Complete the worksheet by consolidating the financial information for these two companies.