Allen Company acquired 100 percent of Bradford Company’s votingstock on January 1, 2014, by issuing 10,000 shares of its $10 parvalue common stock (having a fair value of $15 per share). As ofthat date, Bradford had stockholders’ equity totaling $106,800.Land shown on Bradford’s accounting records was undervalued by$13,200. Equipment (with a five-year remaining life) wasundervalued by $9,600. A secret formula developed by Bradford wasappraised at $20,400 with an estimated life of 20 years. Followingare the separate financial statements for the two companies for theyear ending December 31, 2018. There were no intra-entity payableson that date. Credit balances are indicated by parentheses. AllenCompany Bradford Company Revenues $ (542,000 ) $ (220,000 ) Cost ofgoods sold 179,000 82,000 Depreciation expense 135,000 60,300Subsidiary earnings (74,760 ) 0 Net income $ (302,760 ) $ (77,700 )Retained earnings, 1/1/18 $ (792,000 ) $ (124,200 ) Net income(above) (302,760 ) (77,700 ) Dividends declared 175,500 40,000Retained earnings ,12/31/18 $ (919,260 ) $ (161,900 ) Currentassets $ 300,000 $ 88,000 Investment in Bradford 255,400 0 CompanyLand 490,000 72,000 Buildings and equipment (net) 744,000 164,000Total assets $ 1,789,400 $ 324,000 Current liabilities $ (180,140 )$ (97,100 ) Common stock (600,000 ) (60,000 ) Additional paid-incapital (90,000 ) (5,000 ) Retained earnings, 12/31/18 (919,260 )(161,900 ) Total liabilities and equity $ (1,789,400 ) $ (324,000 )a-1. Complete the table to show the allocation of the fair value inexcess of book value. a-2. What balance will Allen show in itsSubsidiary Earnings account? b. Complete the worksheet byconsolidating the financial information for these twocompanies.
