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Allen Company acquired 100 percent of Bradford Companys voting stock on January 1, 2014 by issuing 10000 shares of its $10 par value common stock having a fair value of $14 pershare As of that

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 pershare). As of that date, Bradford had stockholders’ equity totaling $105,000. Land shown onBradford’s accounting records was undervalued by $10,000. Equipment (with a five-yearremaining life) was undervalued by $5,000. A secret formula developed by Bradford wasappraised at $20,000 with an estimated life of 20 years. Following are the separate financialstatements for the two companies for the year ending December 31, 2018. There were no intraentity payables on that date.Credit balances are indicated by parentheses.Allen Company Bradford Company Revenues $ (485,000) $(190,000) Cost of goods sold160,000 70,000 Depreciation expense 130,000 52,000 Subsidiary earnings (66,000) –0– Netincome $ (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 Company216,000 –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 Allenderived the $66,000 balance in the Subsidiary Earnings account. Prepare a worksheet toconsolidate the financial information for these two companies.

Jul 14 2020 View more View Less

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