Allen Company acquired 100 percent of Bradford Company\'s voting stock on Januar

Question

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 $15 per share). As of that date, Bradford had stockholders' equity totaling $106,800. Land shown on Bradford's accounting records was undervalued by $13,200. Equipment (with a five-year remaining life) was undervalued by $9,600. A secret formula developed by Bradford was appraised st $20,400 with an estimsted life of 20 yesrs. 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. Bradford Company $ (542,8) (228,8ee) 82,808 68, 38e Allen Company Revenues Cost of goods sold Depreciation expense Subsidiary earnings 179,880 135,880 Net income $ (382,76) (77,788) Retained earnings, 1/1/18 Net income (above) Dividends declared $ (792,88) $(124,288) (77,788) (382,76e) 175,58 4,808 $ (919,260) $(161,988) $ 88,8ee Retained earnings ,12/31/18 Current assets Investment in Bradford Company Land Buildings and equipment (net) 255,480 498,88e 744,88e 72,8e8 164,808e $324,8ee Total assets $1,789,480 Current liabilities Common stock Additional paid-in capital Retained earnings, 12/31/18 $ (180,148) (97,188) (680,880) (98,888) (68,888) (5,808) (919,26(161,e Total liabilities and equity $(1,789,488) $(324,888) 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 Sub sidisry Earnings account? b. Complete the worksheet by consolidsting the financial information for these two companies. Complete this question by entering your answers in the tabs below Required A1 Required A2Required B What balance will Allen show in its Subsidiary Earnings account? Equity eamings Required A1 Required B

Explanation / Answer

(A2)

Equity accrual

77700

(-) Ammortisation Exp

2940*

Equity Earnings

74760

*9600/5 years = 1920

20400/20 years = 1020

1920 + 1020 = 2940

Equity accrual

77700

(-) Ammortisation Exp

2940*

Equity Earnings

74760

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