On January 1, 2021, Brooks Corporation exchanged $1,180,500 fair-value consideration for all of the outstanding voting stock of Chandler, Inc. At the acquisition date, Chandler had a book value equal to $972,500. 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 $330,000 with an estimated remaining life of six 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, 2021, 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 $ (508,000 ) $ (665,000 ) Cost of goods sold 207,000 202,000 Gain on bargain purchase (122,000 ) 0 Depreciation and amortization 152,000 169,000 Equity earnings from Chandler (239,000 ) 0 Net income $ (510,000 ) $ (294,000 ) Statement of Retained Earnings Retained earnings, 1/1 $ (1,680,000 ) $ (672,500 ) Net income (above) (510,000 ) (294,000 ) Dividends declared 150,000 70,000 Retained earnings, 12/31 $ (2,040,000 ) $ (896,500 ) Balance Sheet Current assets $ 127,500 $ 273,500 Investment in Chandler 1,471,500 0 Trademarks 194,000 286,000 Patented technology 342,000 467,000 Equipment 701,000 342,000 Total assets $ 2,836,000 $ 1,368,500 Liabilities $ (261,000 ) $ (172,000 ) Common stock (535,000 ) (300,000 ) Retained earnings, 12/31 (2,040,000 ) (896,500 ) Total liabilities and equity $ (2,836,000 ) $ (1,368,500 ) Note: Parentheses indicate a credit balance. a. Determine the following account balances: Gain on bargain purchase. Earnings from Chandler. Investment in Chandler. b. Prepare a December 31, 2021, consolidated worksheet for Brooks and Chandler.

On January 1, 2021, Brooks Corporation exchanged $1,180,500 fair-value consideration for all of the outstanding voting stock of Chandler, Inc. At the acquisition date, Chandler had a book value equal to $972,500. 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 $330,000 with an estimated remaining life of six 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, 2021, 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 $ (508,000 ) $ (665,000 ) Cost of goods sold 207,000 202,000 Gain on bargain purchase (122,000 ) 0 Depreciation and amortization 152,000 169,000 Equity earnings from Chandler (239,000 ) 0 Net income $ (510,000 ) $ (294,000 ) Statement of Retained Earnings Retained earnings, 1/1 $ (1,680,000 ) $ (672,500 ) Net income (above) (510,000 ) (294,000 ) Dividends declared 150,000 70,000 Retained earnings, 12/31 $ (2,040,000 ) $ (896,500 ) Balance Sheet Current assets $ 127,500 $ 273,500 Investment in Chandler 1,471,500 0 Trademarks 194,000 286,000 Patented technology 342,000 467,000 Equipment 701,000 342,000 Total assets $ 2,836,000 $ 1,368,500 Liabilities $ (261,000 ) $ (172,000 ) Common stock (535,000 ) (300,000 ) Retained earnings, 12/31 (2,040,000 ) (896,500 ) Total liabilities and equity $ (2,836,000 ) $ (1,368,500 ) Note: Parentheses indicate a credit balance. a. Determine the following account balances: Gain on bargain purchase. Earnings from Chandler. Investment in Chandler. b. Prepare a December 31, 2021, consolidated worksheet for Brooks and Chandler.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

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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, 2021, 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	$	(508,000	)	$	(665,000	)
Cost of goods sold		207,000			202,000
Gain on bargain purchase		(122,000	)		0
Depreciation and amortization		152,000			169,000
Equity earnings from Chandler		(239,000	)		0
Net income	$	(510,000	)	$	(294,000	)
Statement of Retained Earnings
Retained earnings, 1/1	$	(1,680,000	)	$	(672,500	)
Net income (above)		(510,000	)		(294,000	)
Dividends declared		150,000			70,000
Retained earnings, 12/31	$	(2,040,000	)	$	(896,500	)
Balance Sheet
Current assets	$	127,500		$	273,500
Investment in Chandler		1,471,500			0
Trademarks		194,000			286,000
Patented technology		342,000			467,000
Equipment		701,000			342,000
Total assets	$	2,836,000		$	1,368,500
Liabilities	$	(261,000	)	$	(172,000	)
Common stock		(535,000	)		(300,000	)
Retained earnings, 12/31		(2,040,000	)		(896,500	)
Total liabilities and equity	$	(2,836,000	)	$	(1,368,500	)

Note: Parentheses indicate a credit balance.

a. Determine the following account balances:

Gain on bargain purchase.
Earnings from Chandler.
Investment in Chandler.

b. Prepare a December 31, 2021, consolidated worksheet for Brooks and Chandler.

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