Reference no: EM131588644

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 $14 per share). As of that date, Bradford had stockholders' equity totaling $105,000. Land shown on Bradford'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.

Attachment:- Assignment Files.rar