Allen Company acquired 100 percent of Bradford Companyâ€s voting stock on January 1, 2014, by issuing 10,000 shares of its $10 par value common stock (having a fair value of $14 per share). As of that date, Bradford had stockholders†equity totaling $105,000. Land shown on Bradfordâ€s accounting records was undervalued by $10,000. Equipment (with a five-year remaining life) was undervalued by $5,000. A secret formula developed by Bradford was appraised at $20,000 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

$ (485,000)

Cost of goods sold

Depreciation expense

Subsidiary earnings

Net income
$ (261,000)
$ (68,000)

Retained earnings, 1/1/18
$ (659,000)
$ (98,000)

Net income (above)

Dividends declared



Retained earnings, 12/31/18
$ (744,500)

Current assets
$  268,000
$  75,000

Investment in Bradford Company


Buildings and equipment (net)



Total assets

$ 1,624,500

$  294,000

Current liabilities
$ (190,000)

Common stock

Additional paid-in capital

Retained earnings, 12/31/18

Total liabilities and equity

page 146

Explain how Allen derived the $66,000 balance in the Subsidiary Earnings account.
Prepare a worksheet to consolidate the financial information for these two companies.

DUE BY 8pm 1/28/18

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