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
Revenues
$ (485,000)
$(190,000)
Cost of goods sold
160,000
70,000
Depreciation expense
130,000
52,000
Subsidiary earnings
(66,000)
–0–
Net income
$ (261,000)
$ (68,000)
Retained earnings, 1/1/18
$ (659,000)
$ (98,000)
Net income (above)
(261,000)
(68,000)
Dividends declared
175,500
40,000
Retained earnings, 12/31/18
$ (744,500)
$(126,000)
Current assets
$  268,000
$  75,000
Investment in Bradford Company
216,000
–0–
Land
427,500
58,000
Buildings and equipment (net)
713,000
161,000
Total assets
$ 1,624,500
$  294,000
Current liabilities
$ (190,000)
$(103,000)
Common stock
(600,000)
(60,000)
Additional paid-in capital
(90,000)
(5,000)
Retained earnings, 12/31/18
(744,500)
(126,000)
Total liabilities and equity
$(1,624,500)
$(294,000)
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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