Part a-1
Accounts |
Amount |
Life |
Annual excess amortizations |
Land |
$19700 |
||
Equipment |
6750 |
5 yrs. |
1350 |
Formula |
36400 |
20 yrs. |
1820 |
Total |
$62850 |
$3170 |
Bradford’s acquisition-date fair value |
175000 |
||
Book value of Bradford (acquisition date) |
(112150) |
||
Fair value in excess of book value |
62850 |
||
Excess assigned to specific accounts: |
Remaining life |
Annual excess amortizations |
|
Land |
19700 |
||
Equipment |
6750 |
5 yrs. |
1350 |
Formula |
36400 |
20 yrs. |
1820 |
Total |
62850 |
$3170 |
Part a-2
Equity accrual |
134250 |
amortization expense |
(3170) |
equity earnings |
$131080 |
The equity in subsidiary earnings reflects the equity method
Part B
Consolidation entries |
|||||
Accounts |
Allen Co. |
Bradford Co. |
Debit |
Credit |
Consolidated Totals |
Income statement |
|||||
Revenues |
(521000) |
(303750) |
(824750) |
||
Cost of goods sold |
172000 |
115500 |
287500 |
||
Depreciation expense |
189000 |
54000 |
1350 |
244350 |
|
Amortization expense |
0 |
0 |
1820 |
1820 |
|
Equity in subsidiary earnings |
(131080) |
131080 |
0 |
||
Net income |
(291080) |
(134250) |
(291080) |
||
Statement of Retained Earnings |
|||||
Retained earnings 1/1 |
(762000) |
(103500) |
103500 |
(762000) |
|
Net income (above) |
(291080) |
(134250) |
(291080) |
||
Dividends declared |
175500 |
40000 |
40000 |
175500 |
|
Retained earnings 12/31 |
(877580) |
(197750) |
(877580) |
||
Balance Sheet |
|||||
Current assets |
374000 |
101500 |
475500 |
||
Investment in Bradford Co |
309750 |
40000 |
349750 |
0 |
|
Land |
574000 |
86100 |
19700 |
679800 |
|
Buildings and equipment (net) |
854000 |
186000 |
1350 |
1350 |
1040000 |
Formula |
0 |
0 |
29120 |
1820 |
27300 |
Total assets |
2111750 |
373600 |
2222600 |
||
Current liabilities |
(544170) |
(110850) |
(655020) |
||
Common stock |
(600000) |
(60000) |
60000 |
(600000) |
|
Additional paid-in capital |
(90000) |
(5000) |
5000 |
(90000) |
|
Retained earnings, 12/31 |
(877580) |
(197750) |
(877580) |
||
Total liabilities and equity |
(2111750) |
(373600) |
392920 |
392920 |
(373600) |
6750-(1350*4) = 1350
36400-(1820*4) = 29120
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