Homework Answers
Part A
Acquisition-date fair value allocation and annual excess amortization
|
Consideration transferred |
1193000 |
|
|
Chandler book value (given) |
980000 |
|
|
Technology undervaluation (6 yr. life) |
348000 |
|
|
Acquisition-date fair value of net assets |
1328000 |
|
|
Gain on bargain purchase |
(135000) |
|
|
Chandler net income |
(245,000) |
|
|
Technology amortization (348000/6) |
58000 |
|
|
Equity earnings in Chandler |
(187,000) |
|
|
Fair value of net assets at acquisition-date |
1,328,000 |
|
|
Equity earnings from Chandler |
187,000 |
|
|
Dividends declared |
40,000 |
|
|
Investment in Chandler 12/31/15 |
1,555,000 |
Part B
BROOKS AND CHANDLER
Consolidated Worksheet
For the year ending December 31, 2018
|
Income Statement |
Brooks |
Chandler |
Consolidation Entries |
Consolidated |
|
|
Debit |
Credit |
||||
|
Revenues |
(629000) |
(577000) |
(1206000) |
||
|
Cost of goods sold |
189000 |
175000 |
364000 |
||
|
Gain on bargain purchase |
(135000) |
0 |
135000 |
||
|
Depreciation and amortization |
147000 |
157000 |
58000 |
362000 |
|
|
Equity earnings in Chandler |
(187000) |
199000 |
0 |
||
|
Net income |
(615000) |
(245000) |
(615000) |
||
|
Statement of Retained Earnings |
|||||
|
Retained earnings, 1/1 |
(1670000) |
(680000) |
680000 |
(1670000) |
|
|
Net income |
(615000) |
(245000) |
(615000) |
||
|
Dividends declared |
100000 |
40000 |
40000 |
100000 |
|
|
Retained earnings, 12/31 |
(2185000) |
(885000) |
(2185000) |
||
|
Balance Sheet |
|||||
|
Current assets |
264000 |
310000 |
574000 |
||
|
Investment in Chandler |
1475000 |
40000 |
1515000 |
0 |
|
|
Trademarks |
179000 |
214000 |
393000 |
||
|
Patented technology |
359000 |
415000 |
348000 |
58000 |
1064000 |
|
Equipment |
653000 |
384000 |
1037000 |
||
|
Total assets |
2930000 |
1323000 |
3068000 |
||
|
Liabilities |
(210000) |
(138000) |
(348000) |
||
|
Common stock |
(535000) |
(300000) |
300000 |
(535000) |
|
|
Retained earnings, 12/31 |
(2185000) |
(885000) |
(2185000) |
||
|
Total liabilities and equity |
(2930000) |
(1323000) |
(3068000) |
||
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In case expected synergies...
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had fair values equal to their respective book values except for
the patented technology account, which was undervalued by $180,000
with an estimated remaining life of six years. The Chandler
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