On January 1, 2021, Brooks Corporation exchanged $1,235,000 fair-value consideration for all of the outstanding voting stock of Chandler, Inc. At the acquisition date, Chandler had a book value equal to $1,185,000. 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 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 $ (466,000 ) $ (671,000 ) Cost of goods sold 252,000 204,000 Gain on bargain purchase (196,000 ) 0 Depreciation and amortization 139,000 177,000 Equity earnings from Chandler (249,000 ) 0 Net income $ (520,000 ) $ (290,000 ) Statement of Retained Earnings Retained earnings, 1/1 $ (1,830,000 ) $ (885,000 ) Net income (above) (520,000 ) (290,000 ) Dividends declared 300,000 60,000 Retained earnings, 12/31 $ (2,050,000 ) $ (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 307,000 455,000 Equipment 625,000 398,000 Total assets $ 2,892,000 $ 1,566,000 Liabilities $ (307,000 ) $ (151,000 ) Common stock (535,000 ) (300,000 ) Retained earnings, 12/31 (2,050,000 ) (1,115,000 ) Total liabilities and equity $ (2,892,000 ) $ (1,566,000 ) 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 $1,235,000 fair-value consideration for all of the outstanding voting stock of Chandler, Inc. At the acquisition date, Chandler had a book value equal to $1,185,000. 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 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 $ (466,000 ) $ (671,000 ) Cost of goods sold 252,000 204,000 Gain on bargain purchase (196,000 ) 0 Depreciation and amortization 139,000 177,000 Equity earnings from Chandler (249,000 ) 0 Net income $ (520,000 ) $ (290,000 ) Statement of Retained Earnings Retained earnings, 1/1 $ (1,830,000 ) $ (885,000 ) Net income (above) (520,000 ) (290,000 ) Dividends declared 300,000 60,000 Retained earnings, 12/31 $ (2,050,000 ) $ (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 307,000 455,000 Equipment 625,000 398,000 Total assets $ 2,892,000 $ 1,566,000 Liabilities $ (307,000 ) $ (151,000 ) Common stock (535,000 ) (300,000 ) Retained earnings, 12/31 (2,050,000 ) (1,115,000 ) Total liabilities and equity $ (2,892,000 ) $ (1,566,000 ) 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.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

ChapterA2: Investments

Section: Chapter Questions

Problem 30E

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Question

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	$	(466,000	)	$	(671,000	)
Cost of goods sold		252,000			204,000
Gain on bargain purchase		(196,000	)		0
Depreciation and amortization		139,000			177,000
Equity earnings from Chandler		(249,000	)		0
Net income	$	(520,000	)	$	(290,000	)
Statement of Retained Earnings
Retained earnings, 1/1	$	(1,830,000	)	$	(885,000	)
Net income (above)		(520,000	)		(290,000	)
Dividends declared		300,000			60,000
Retained earnings, 12/31	$	(2,050,000	)	$	(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		307,000			455,000
Equipment		625,000			398,000
Total assets	$	2,892,000		$	1,566,000
Liabilities	$	(307,000	)	$	(151,000	)
Common stock		(535,000	)		(300,000	)
Retained earnings, 12/31		(2,050,000	)		(1,115,000	)
Total liabilities and equity	$	(2,892,000	)	$	(1,566,000	)