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On January 1 2012 Bretz Inc acquired 60 percent of the outstanding shares of Keane Company for $573000 in cash The price paid was proportionate to Keane’s total fair value although at the date

On January 1, 2012, Bretz, Inc., acquired 60 percent of the outstanding shares of Keane Company for $573,000 in cash. The price paid was proportionate to Keane’s total fair value although at the date of acquisition, Keane had a total book value of $810,000. All assets acquired and liabilities assumed had fair values equal to book values except for a copyright (six-year remaining life) that was undervalued in Keane’s accounting records by $120,000. During 2012, Keane reported net income of $150,000 and paid cash dividends of $80,000. On January 1, 2013, Bretz bought an additional 30 percent interest in Keane for $300,000.

The following financial information is for these two companies for 2013. Keane issued no additional capital stock during either 2012 or 2013.

 

 

Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (402,000)

 

$ (300,000)

Operating expenses . . . . . . . . . . . . . . . . . . . . .

200,000

 

120,000

Equity in Keane earnings. . . . . . . . . . . . . . . . . .

(144,000)

 

–0–

Net income . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (346,000)

 

$ (180,000)

Retained earnings 1/1 . . . . . . . . . . . . . . . . . . . .

$ (797,000)

 

$ (500,000)

Net income (above) . . . . . . . . . . . . . . . . . . . . .

(346,000)

 

(180,000)

Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . .

143,000

 

60,000

Retained earnings 12/31 . . . . . . . . . . . . . . . .

$(1,000,000)

 

$ (620,000)

Current assets . . . . . . . . . . . . . . . . . . . . . . . . .

$ 224,000

 

$ 190,000

Investment in Keane Company . . . . . . . . . . . . .

994,500

 

–0–

Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . .

106,000

 

600,000

Copyrights . . . . . . . . . . . . . . . . . . . . . . . . . . . .

210,000

 

300,000

Equipment (net) . . . . . . . . . . . . . . . . . . . . . . . .

380,000

 

110,000

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,914,500

 

$ 1,200,000

Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (453,000)

 

$ (200,000)

Common stock . . . . . . . . . . . . . . . . . . . . . . . . .

(400,000)

 

(300,000)

Additional paid-in capital . . . . . . . . . . . . . . . . .

(60,000)

 

(80,000)

Additional paid-in capital—step acquisition . . .

(1,500)

 

–0–

Retained earnings 12/31 . . . . . . . . . . . . . . . . . .

(1,000,000)

 

(620,000)

Total liabilities and equities . . . . . . . . . . . . . .

$(1,914,500)

 

$(1,200,000)

 

B r etz, Inc. Keane Company

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

a. Show the journal entry Bretz made to record its January 1, 2013, acquisition of an addi- tional 30 percent of Keane Company shares.

b. Prepare a schedule showing how Bretz determined the Investment in Keane Company bal- ance as of December 31, 2013.

c. Prepare a consolidated worksheet for Bretz, Inc., and Keane Company for December 31,

2013.

Jul 11 2020 View more View Less

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