1. 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 per share). As of that date, Bradford had stockholders’ equity totaling $105,000. Land shown on Bradford’s accounting records was undervalued by $10,000. Equipment (with a five-year remaining life) was undervalued by $5,000. A secret formula developed by Bradford was appraised at $20,000 with an estimated life of 20 years.Following are the separate financial statements for the two companies for the year ending December 31, 2018. There were no intra-entity payables on that date. Credit balances are indicated by parentheses.
    Allen CompanyBradford Company
    Revenues$ (485,000)$(190,000)
    Cost of goods sold160,00070,000
    Depreciation expense130,00052,000
    Subsidiary earnings (66,000) –0–
    Net income$ (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–
    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)

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    1. Explain how Allen derived the $66,000 balance in the Subsidiary Earnings account.
    2. Prepare a worksheet to consolidate the financial information for these two companies.

    DUE BY 8pm 1/28/18

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