ACCOUNTING 4400 Problem 3-33

Subject: Business    / Accounting
Question
Problem 3-33 (LO 3-3, 3—4, 3-6) On January 1. 2015. Brooks Corporation exchanged 31.235.000 fair-value consideration for all of the
outstanding voting stock of Chandler. Inc. At the acquisition date. lChandler had a book value equal to $1 .185.000. Chandler‘s individual assets and liabilities had fair values equal to their respective book values
except for the patented technology account. which was undervalued by $246,000 with an estimated
remaining life ofsix years. The Chandler acquisition was Brooks’s 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 ?nancial statements for consolidation. Dividends were declared and paid in the same period. Brooks Corp. Chandler Inc. Income Statiement Revenues $ (466.000) $ (6?1.000) lCost of goods sold 252.000 204.000 Gain on bargain purchase (196.000) 0 Depreciation and amortization 139.000 17?.000 Equity eamings from Chandler (249.000) 0
Net income $ (520.000) $ (290.000) Statement of Retained Eamlngs Retained earnings. in 00.530000) s (005.000) Net income (above) (520,000) (200,000) Dividends declared 300.000 00.000
Retained earnings. 12:31 02.050000) $(1.115.000) Balance Sheet Current assets $ 142.000 $ 422.000
Investment in Chandler 1 .620.000 0
Trademarks 198.000 291 .000 Patented technology 30?.000 455.000

Current assets $ 142.000 Investment in Chandler 1.620.000
Trademarks 198.000
Patented technology 307.000
Equipment 625.000 Total assets $ 2.592.000
Liabilities $ (307.000)
Common stock (535.000)
Retained esmings. 121’31 (2.050.000) Total liabilities and equity $(2.892.000) Note: Parentheses indicate a credit balance. a. Determine the following account balances. $ 422.000
0
291 .000 455.000
398.000 $ 1.506.000 $ (151.000)
(300.000)
(1.115.000) $(1.5ss.000) Consideration transferred $ 1.235.000
Chandler book value {given} $ 1.185.000
Technolon undervaluation 246.000
Acquisition fair value of net assets 1.431.000 Gain on bargain purchase Chandler net income Technology amortization Equity earnings in Chandler Fair value of net assets at acquisition-date Equity eamirgs in Chandler

Equity eamings in Chandler Dividends received Investment in Chandler 12131“ 5 b. Prepare a December 31. 2015. consolidated worksheet for Brooks and Chardler. (For accounts where
multiple consolidation entries are required. combine all debit entries Into one amount and enter
this amount In the debit column of the worksheet. Similarly. combine all credit entries Into one
amount and enter this amount In the credit column of the worksheet.) Income Statement Revenues $ (466,000) 8 (611,000) Cost of goods sold 252,000 204,000 Gain on bargain purchase (196,000) 0 Depreciation and amortization 139.000 1??.000 Equity eamings in Chandler (249,000) 0
Net income $ (520,000) 5 (290,000) Statement of Retained Eamlngs
Retained earnings. 1.-’1 $ (1,830,000) 5 (885,000)
Net income (520,000) (290,000)
Dividends declared 300.000 60.000

Income Statement Revenues $ (466,000) $ (6?1.000)
Cost of goods sold 252.000 204.000
Gain on bargain purchase (196,000) 0
Depreciation and amortization 139.000 11?.000
Equity eamings in Chandler (249,000) 0
Net income $ (520,000) it (290.000)
Statement of Retained Earnings
Retained earnings. 1H $ (1.830000) 5 (885.000)
Net income (520,000) (290.000)
Dividends declared 300.000 60.000
Retained eamings. 12131 $ (2.050,000) S (1.115.000)
Balance Sheet
Current assets $ 142.000 $ 422.000
Investment in Chandler 1,620,000 0
Trademarks 195.000 291 .000
Patented technology 30?.000 455.000
Equipment 625.000 399.000
Total assets $ 2,692,000 $ 1.566.000
Liabilities $ (30?,000) $ (151.000)
Common stock (535,000) (300.000)
Retained earnings. 12-‘31 (2.050,000) (1.115.000)
Total liabilities and equity $ (2.892000) 5 (1.566.000)

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