Reference no: EM132787336

Dobroskey Company acquired 100 percent of Sparacio's Company voting stock on January 1, 2016, by issuing 10,000 shares of its $10 par value common stock (having a fair value of $14 per share). As of that date, Sparacio had stockholders' equity totaling $105,000. Land shown on Sparacio's accounting records was undervalued by $10,000. Equipment (with a 5-year remaining life) was undervalued by $5,000. A secret formula developed by Sparacio 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, 2020. There were no intra-entity payables on that date. Credit balances are indicated by parenthesis.

                                                                                                                      Dobroskey                  Sparacio
Revenues.......................................................................... $(485,000)                      $ (190,000)
Cost of goods sold....................................................................160,000                          70,000
Depreciation expense............................................................ 130,000                                  52,000
Equity earnings of Sparacio.........................................................(66,000)                                     -0-
Net Income...............................................................$ (261,000)                                    $ (68,000)
Retained earnings, 1/1/20...................................................... $ (659,000)                             $ (98,000)
Net income (above)............................................................... (261,000)                              68,000
Dividends declared............................................................... 175,500                             40,000
Retained earnings, 12/31/20............................................$ (744,500)                               $ (126,000)
Current assets..................................................................... $ 268,000                             $ 75,000
Investment in Sparacio 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............................................................... $ (110,000)                              $ (19,000)
Long-term liabilities............................................................ (80,000)                                     (84,000)
Common stock.................................................................. (600,000)                                    (60,000)
Additional paid-in capital......................................................... (90,000)                                    (5,000)
Retained earnings, 12/31/20...................................................... (744,500)                                (126,000)
Total liabilities and equity.......................................... $ (1,624,500)                                       $ (294,000)

Requirements:

Question A) Construct Dobroskey's acquisition-date-fair-value allocation schedule for its investment in Sparacio.

Question B) Create a worksheet to consolidate the financial information for these two companies.