Allen Company acquired 100 percent of Bradford Company's voting stock on January 1, 2014, by issuing 10,000 shares of its $10 par value common stock (having a fair value of $14 per share).

As of that date, Bradford had stockholders' equity totaling $105,000. Land shown on Bradford's accounting records was undervalued by $10,000. Equipment (with a five-year remaining life) was undervalued by $5,000. A secret formula developed by Bradford was appraised at $20,000 with an estimated life of 20 years.

Following are the separate financial statements for the two companies for the year ending December 31, 2018. There were no intra-entity payables on that date. Credit balances are indicated by parentheses.

a. Explain how Allen derived the $66,000 balance in the Subsidiary Earnings account.
b. Prepare a worksheet to consolidate the financial information for these two companies.

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Allen Company Bradford Company Revenues Cost of goods sold Depreciation expense Subsidiary earnings $ (485,000) 160,000 130,000 $(190,000) 70,000 52,000 Net income $ (261,000 $(68,000 Retained earnings, 1/1/18 Net income (above) Dividends declared. $(659,000) (261,000) 175,500 $ 744,500 $ (98,000) (68,000 40,000 $(126,000) Retained earnings, 12/31/18 Current assets Investment in Bradford Company Land Buildings and equipment (net) $ 268,000 216,000 427,500 713,000 $ 1.624,500 $ 75,000 58,000 161,000 $294,000 Total assets . Current liabilities... Common stock Additional paid-in capital Retained earnings, 12/31/18 $ (190,000) (600,000) (90,000) $(103,000) (60,000 (5,000) (126,000 $(294,000 Total liabilities and equity 1,624,5