On January 1, 2021, Brooks Corporation exchanged $1,259,000 fair-value consideration for all of the outstanding voting stock of Chandler, Inc. At the acquisition date, Chandler had a book value equal to $1,145,000. 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 $264,000 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 $ (662,000 ) $ (553,000 ) Cost of goods sold 173,000 196,000 Gain on bargain purchase (150,000 ) 0 Depreciation and amortization 140,000 147,000 Equity earnings from Chandler (166,000 ) 0 Net income $ (665,000 ) $ (210,000 ) Statement of Retained Earnings Retained earnings, 1/1 $ (1,800,000 ) $ (845,000 ) Net income (above) (665,000 ) (210,000 ) Dividends declared 200,000 50,000 Retained earnings, 12/31 $ (2,265,000 ) $ (1,005,000 ) Balance Sheet Current assets $ 371,000 $ 528,000 Investment in Chandler 1,525,000 0 Trademarks 115,000 225,000 Patented technology 341,000 412,000 Equipment 683,000 310,000 Total assets $ 3,035,000 $ 1,475,000 Liabilities $ (235,000 ) $ (170,000 ) Common stock (535,000 ) (300,000 ) Retained earnings, 12/31 (2,265,000 ) (1,005,000 ) Total liabilities and equity $ (3,035,000 ) $ (1,475,000 ) Note: Parentheses indicate a credit balance. a. Determine the following account balances: Determine the following account balances. (Input all amounts as positive values.) Gain on bargain purchase. Earnings from Chandler. Investment in Chandler. b. Prepare a December 31, 2021, consolidated worksheet for Brooks and Chandler. Prepare a December 31, 2021, consolidated worksheet for Brooks and Chandler. (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. Input all amounts as positive values.)

On January 1, 2021, Brooks Corporation exchanged $1,259,000 fair-value consideration for all of the outstanding voting stock of Chandler, Inc. At the acquisition date, Chandler had a book value equal to $1,145,000. 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 $264,000 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 $ (662,000 ) $ (553,000 ) Cost of goods sold 173,000 196,000 Gain on bargain purchase (150,000 ) 0 Depreciation and amortization 140,000 147,000 Equity earnings from Chandler (166,000 ) 0 Net income $ (665,000 ) $ (210,000 ) Statement of Retained Earnings Retained earnings, 1/1 $ (1,800,000 ) $ (845,000 ) Net income (above) (665,000 ) (210,000 ) Dividends declared 200,000 50,000 Retained earnings, 12/31 $ (2,265,000 ) $ (1,005,000 ) Balance Sheet Current assets $ 371,000 $ 528,000 Investment in Chandler 1,525,000 0 Trademarks 115,000 225,000 Patented technology 341,000 412,000 Equipment 683,000 310,000 Total assets $ 3,035,000 $ 1,475,000 Liabilities $ (235,000 ) $ (170,000 ) Common stock (535,000 ) (300,000 ) Retained earnings, 12/31 (2,265,000 ) (1,005,000 ) Total liabilities and equity $ (3,035,000 ) $ (1,475,000 ) Note: Parentheses indicate a credit balance. a. Determine the following account balances: Determine the following account balances. (Input all amounts as positive values.) Gain on bargain purchase. Earnings from Chandler. Investment in Chandler. b. Prepare a December 31, 2021, consolidated worksheet for Brooks and Chandler. Prepare a December 31, 2021, consolidated worksheet for Brooks and Chandler. (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. Input all amounts as positive values.)

SWFT Comprehensive Vol 2020

43rd Edition

ISBN:9780357391723

Author:Maloney

Publisher:Maloney

Chapter20: Corporations: Distributions In Complete Liquidation And An Overview Of Reorganizations

Section: Chapter Questions

Problem 35P

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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	$	(662,000	)	$	(553,000	)
Cost of goods sold		173,000			196,000
Gain on bargain purchase		(150,000	)		0
Depreciation and amortization		140,000			147,000
Equity earnings from Chandler		(166,000	)		0
Net income	$	(665,000	)	$	(210,000	)
Statement of Retained Earnings
Retained earnings, 1/1	$	(1,800,000	)	$	(845,000	)
Net income (above)		(665,000	)		(210,000	)
Dividends declared		200,000			50,000
Retained earnings, 12/31	$	(2,265,000	)	$	(1,005,000	)
Balance Sheet
Current assets	$	371,000		$	528,000
Investment in Chandler		1,525,000			0
Trademarks		115,000			225,000
Patented technology		341,000			412,000
Equipment		683,000			310,000
Total assets	$	3,035,000		$	1,475,000
Liabilities	$	(235,000	)	$	(170,000	)
Common stock		(535,000	)		(300,000	)
Retained earnings, 12/31		(2,265,000	)		(1,005,000	)
Total liabilities and equity	$	(3,035,000	)	$	(1,475,000	)

Note: Parentheses indicate a credit balance.

a. Determine the following account balances: Determine the following account balances. (Input all amounts as positive values.)

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

b. Prepare a December 31, 2021, consolidated worksheet for Brooks and Chandler. Prepare a December 31, 2021, consolidated worksheet for Brooks and Chandler. (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. Input all amounts as positive values.)

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