Question

Allen Company acquired 100 percent of Bradford Company’s voting stock on January 1, 2014, by issuing...

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 $17.5 per share). As of that date, Bradford had stockholders’ equity totaling $112,150. Land shown on Bradford’s accounting records was undervalued by $19,700. Equipment (with a five-year remaining life) was undervalued by $6,750. A secret formula developed by Bradford was appraised at $36,400 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

$

(521,000

)

$

(303,750

)

Cost of goods sold

172,000

115,500

Depreciation expense

189,000

54,000

Subsidiary earnings

(131,080

)

0

Net income

$

(291,080

)

$

(134,250

)

Retained earnings, 1/1/18

$

(762,000

)

$

(103,500

)

Net income (above)

(291,080

)

(134,250

)

Dividends declared

175,500

40,000

Retained earnings ,12/31/18

$

(877,580

)

$

(197,750

)

Current assets

$

374,000

$

101,500

Investment in Bradford

309,750

0

Company

Land

574,000

86,100

Buildings and equipment (net)

854,000

186,000

Total assets

$

2,111,750

$

373,600

Current liabilities

$

(544,170

)

$

(110,850

)

Common stock

(600,000

)

(60,000

)

Additional paid-in capital

(90,000

)

(5,000

)

Retained earnings, 12/31/18

(877,580

)

(197,750

)

Total liabilities and equity

$

(2,111,750

)

$

(373,600

)

a-1. Complete the table to show the allocation of the fair value in excess of book value.

a-2. What balance will Allen show in its Subsidiary Earnings account?

b. Complete the worksheet by consolidating the financial information for these two companies.

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1
Accounts Amount Life Annual excess amortizations
Land          19,700                -                   -  
Equipment            6,750 5 years          1,350
Formula      36,400.0 20 years          1,820
Total          62,850          3,170


0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Allen Company acquired 100 percent of Bradford Company’s voting stock on January 1, 2014, by issuing...
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 $26.5 per share). As of that date, Bradford had stockholders’ equity totaling $211,250. Land shown on Bradford’s accounting records was undervalued by $12,200. Equipment (with a five-year remaining life) was undervalued by $5,350. A secret formula developed by Bradford was appraised at $36,200 with an estimated life of 20 years....
On January 1, 2018, Marshall Company acquired 100 percent of the outstanding common stock of Tucker...
On January 1, 2018, Marshall Company acquired 100 percent of the outstanding common stock of Tucker Company. To acquire these shares, Marshall issued $267,000 in long-term liabilities and 20,000 shares of common stock having a par value of $1 per share but a fair value of $10 per share. Marshall paid $22,000 to accountants, lawyers, and brokers for assistance in the acquisition and another $7,000 in connection with stock issuance costs. Prior to these transactions, the balance sheets for the...
On January 1, 2017, Gardner, Inc. acquired 100 percent of the common stock of Drake Company...
On January 1, 2017, Gardner, Inc. acquired 100 percent of the common stock of Drake Company for $760,000 in cash and other fair-value consideration. Gardner Company fair value was allocated among its net assets as follows: The December 31, 2018 trial balance for the parent and subsidiary follows: Fair value of consideration transferred for Drake Company $760,000 Book value of Drake Company Common stock an APIC $130,000 Retained Earnings $370,000 $500,000 Excess Fair value over book value to: Trademark (10-year...
Chapman Company obtains 100 percent of Abernethy Company’s stock on January 1, 2014. As of that...
Chapman Company obtains 100 percent of Abernethy Company’s stock on January 1, 2014. As of that date, Abernethy has the following trial balance: Debit Credit   Accounts payable $ 56,700      Accounts receivable $ 43,800   Additional paid-in capital 50,000      Buildings (net) (4-year life) 143,000   Cash and short-term investments 80,250   Common stock 250,000      Equipment (net) (5-year life) 295,000   Inventory 110,500   Land 112,000   Long-term liabilities (mature 12/31/17) 171,000      Retained earnings, 1/1/14 268,750      Supplies 11,900      Totals $ 796,450 $...
Giant acquired all of Small’s common stock on January 1, 2014, in exchange for cash of...
Giant acquired all of Small’s common stock on January 1, 2014, in exchange for cash of $770,000. On that day, Small reported common stock of $170,000 and retained earnings of $400,000. At the acquisition date, $64,500 of the fair-value price was attributed to undervalued land while $72,000 was assigned to undervalued equipment having a 10-year remaining life. The $63,500 unallocated portion of the acquisition-date excess fair value over book value was viewed as goodwill. Over the next few years, Giant...
Chapman Company obtains 100 percent of Abernethy Company’s stock on January 1, 2014. As of that...
Chapman Company obtains 100 percent of Abernethy Company’s stock on January 1, 2014. As of that date, Abernethy has the following trial balance: Debit Credit   Accounts payable $ 54,100      Accounts receivable $ 48,500   Additional paid-in capital 50,000      Buildings (net) (4-year life) 130,000   Cash and short-term investments 66,000   Common stock 250,000      Equipment (net) (5-year life) 437,500   Inventory 109,000   Land 89,000   Long-term liabilities (mature 12/31/17) 178,500      Retained earnings, 1/1/14 358,800      Supplies 11,400      Totals $ 891,400 $...
Hamlen Corporation acquired 100 percent of Pink's Company's common stock on January 1, 2015. Balance sheet...
Hamlen Corporation acquired 100 percent of Pink's Company's common stock on January 1, 2015. Balance sheet data for the two companies immediately following the acquisition follow: .....................................................Hamlen.................. Pink's Cash.............................................$ 30,000 ..............$25,000 Accounts Receivable........................... 80,000 ................40,000 Inventory........................................ 150,000............... 55,000 Land.............................................. 65,000 ................40,000 Buildings and Equipment...................... 260,000............. 160,000 Less: Accumulated Depreciation............ (120,000)............. (50,000) Investment in Pong Company Stock.......... 150,000 Total Assets...................................... $615,000 ........$270,000 Accounts Payable...............................$ 45,000.......... $ 33,000 Taxes Payable.................................... 20,000............... 8,000 Bonds Payable ................................... 200,000........... 100,000 Common Stock..................................... 50,000 ............20,000 Retained...
Giant acquired all of Small’s common stock on January 1, 2014, in exchange for cash of...
Giant acquired all of Small’s common stock on January 1, 2014, in exchange for cash of $770,000. On that day, Small reported common stock of $170,000 and retained earnings of $400,000. At the acquisition date, $75,500 of the fair-value price was attributed to undervalued land while $52,000 was assigned to undervalued equipment having a 10-year remaining life. The $72,500 unallocated portion of the acquisition-date excess fair value over book value was viewed as goodwill. Over the next few years, Giant...
On January 1, 2014, Pirate Company acquired an 80% interest in Sun Company for $425,000. On...
On January 1, 2014, Pirate Company acquired an 80% interest in Sun Company for $425,000. On that date, Sun reported stockholder’s equity of $400,000: $100,000 in common stock and $300,000 in retained earnings. In setting the acquisition price, Pirate appraised three accounts at values different from the balances reported within Sun’s financial records: Buildings (8-year remaining life): Undervalued by $32,500 Land: Undervalued by $50,000 Royalty agreement (20-year remaining life): Not previously recorded; Valued at $30,000 At December 31, 2018, the...
On July 1, 2018, Truman Company acquired a 70 percent interest in Atlanta Company in exchange...
On July 1, 2018, Truman Company acquired a 70 percent interest in Atlanta Company in exchange for consideration of $788,900 in cash and equity securities. The remaining 30 percent of Atlanta’s shares traded closely near an average price that totaled $338,100 both before and after Truman’s acquisition. In reviewing its acquisition, Truman assigned a $129,500 fair value to a patent recently developed by Atlanta, even though it was not recorded within the financial records of the subsidiary. This patent is...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT