90.2K

Verified Solution

Link Copied!

On January 1, 2018, Brooks Corporation exchanged $1,148,000 fair-value consideration for all of the outstanding voting stock of Chandler, Inc. At the acquisition date, Chandler had a book value equal to $970,000. Chandlers individual assets and liabilities had fair values equal to their respective book values except for the patented technology account, which was undervalued by $294,000 with an estimated remaining life of six years. The Chandler acquisition was Brookss only business combination for the year.

In case expected synergies did not materialize, Brooks Corporation wished to prepare for a potential future spin-off of Chandler, Inc. Therefore, Brooks had Chandler maintain its separate incorporation and independent accounting information system as elements of continuing value.

On December 31, 2018, each company submitted the following financial statements for consolidation. Dividends were declared and paid in the same period.

	Brooks Corp.				Chandler Inc.
Income Statement
Revenues	$	(782,500	)		$	(619,000	)
Cost of goods sold		203,000				236,000
Gain on bargain purchase		(116,000	)			0
Depreciation and amortization		142,000				155,000
Equity earnings from Chandler		(179,000	)			0
Net income	$	(732,500	)		$	(228,000	)
Statement of Retained Earnings
Retained earnings, 1/1	$	(1,505,000	)		$	(670,000	)
Net income (above)		(732,500	)			(228,000	)
Dividends declared		300,000				60,000
Retained earnings, 12/31	$	(1,937,500	)		$	(838,000	)
Balance Sheet
Current assets	$	129,500			$	266,000
Investment in Chandler		1,383,000				0
Trademarks		150,000				205,000
Patented technology		390,000				450,000
Equipment		611,000				348,000
Total assets	$	2,663,500			$	1,269,000
Liabilities	$	(191,000	)		$	(131,000	)
Common stock		(535,000	)			(300,000	)
Retained earnings, 12/31		(1,937,500	)			(838,000	)
Total liabilities and equity	$	(2,663,500	)		$	(1,269,000	)

Note: Parentheses indicate a credit balance.

BROOKS AND CHANDLER Consolidation Worksheet For Year Ending December 31, 2018 Consolidation Entries Consolidated Accounts Brooks Chandler Debit Credit Tntals Income Statement $1,401 500 439,000 Revenues $ (782,500) (619,000) Cost of goods sold 203,000 236,000 116,000 346,000 (116,000) Sain on bargain purchase Depreciation and amortization 142,000 155,000 49,000 179,000 Equity earnings in Chandler (179,000) $732,500 $ (732,500) (228,000) Net income Statement of Retaine Earnings 1505,000)(670,000) 732,500) 228,000) 1,505000 670,000 Retained earnings, 1/1 Net income 732 500 60,000 300,000 Dividends declared 300,000 60,000 $ 1,937,500 O Retained earnings, 12131 1937500 (838,000) Balance Sheet Current assets $ 129,500 266,000 $ 395,500 Investment in Chandler 1,383,000 1,383,000 1,383,000 Trademarks 150,000 205,000 355,000 1,085,000 959,000 $2,794,500 Patented technolog;y 390,000 450,000 294,000 49,000 348,000 611,000 Equipment $2,663,500 1,269,000 Total assets $ 322,000 $ (191,000) (131,000) 535,000 300,000 Common stock 535,000) 300,000) Retained earnings, 12/31 (1,937,500) (838,000) 1,937,500 0 2,794 500 Total liabilities and equity 663.500 1,269,000

Answer & Explanation Solved by verified expert

See Answer