| On January 1, 2015, Brooks Corporation exchanged $1,183,000 fair-value consideration for all of the outstanding voting stock of Chandler, Inc. At the acquisition date, Chandler had a book value equal to $1,105,000. Chandlers individual assets and liabilities had fair values equal to their respective book values except for the patented technology account, which was undervalued by $204,000 with an estimated remaining life of six years. The Chandler acquisition was Brookss only business combination for the year. |
| In case expected synergies did not materialize, Brooks Corporation wished to prepare for a potential future spin-off of Chandler, Inc. Therefore, Brooks had Chandler maintain its separate incorporation and independent accounting information system as elements of continuing value. |
| On December 31, 2015, each company submitted the following financial statements for consolidation. Dividends were declared and paid in the same period. | | | Brooks Corp. | | Chandler Inc. | | | Income Statement | | | | | | | | | | | Revenues | | $ | (640,000 | ) | | $ | (587,000 | ) | | | Cost of goods sold | | | 255,000 | | | | 203,000 | | | | Gain on bargain purchase | | | (126,000 | ) | | | 0 | | | | Depreciation and amortization | | | 150,000 | | | | 151,000 | | | | Equity earnings from Chandler | | | (199,000 | ) | | | 0 | | | | | | | | | | | | | | | Net income | | $ | (560,000 | ) | | $ | (233,000 | ) | | | | | | | | | | | | | | Statement of Retained Earnings | | | | | | | | | | | Retained earnings, 1/1 | | $ | (1,835,000 | ) | | $ | (805,000 | ) | | | Net income (above) | | | (560,000 | ) | | | (233,000 | ) | | | Dividends declared | | | 100,000 | | | | 40,000 | | | | | | | | | | | | | | | Retained earnings, 12/31 | | $ | (2,295,000 | ) | | $ | (998,000 | ) | | | | | | | | | | | | | | Balance Sheet | | | | | | | | | | | Current assets | | $ | 343,000 | | | $ | 432,000 | | | | Investment in Chandler | | | 1,468,000 | | | | 0 | | | | Trademarks | | | 134,000 | | | | 221,000 | | | | Patented technology | | | 395,000 | | | | 410,000 | | | | Equipment | | | 693,000 | | | | 341,000 | | | | | | | | | | | | | | | Total assets | | $ | 3,033,000 | | | $ | 1,404,000 | | | | | | | | | | | | | | | Liabilities | | $ | (203,000 | ) | | $ | (106,000 | ) | | | Common stock | | | (535,000 | ) | | | (300,000 | ) | | | Retained earnings, 12/31 | | | (2,295,000 | ) | | | (998,000 | ) | | | | | | | | | | | | | | Total liabilities and equity | | $ | (3,033,000 | ) | | $ | (1,404,000 | ) | |
