On January 1, 2009, Bretz, Inc., acquired 60 percent of the outstanding shares of Keane Company for $573,000 in cash. The price paid was proportionate to Keane’s total fair value although at the date of acquisition, Keane had a total book value of $810,000. All assets acquired and liabilities assumed had fair values equal to book values except for a copyright (six-year remaining life) that was undervalued in Keane’s accounting records by $120,000. During 2009, Keane reported net income of $150,000 and paid cash dividends of $80,000. On January 1, 2010, Bretz bought an additional 30 percent interest in Keane for $300,000.

The following financial information is for these two companies for 2009. Keane issued no additional capital stock during either 2009 or 2010. LO6 Revenues.

Operating expenses Equity in Keane earnings Bretz, Inc.

$ (402,000) 200,000 (144,000)

Keane Company

$ (300,000) 120,000 -0-

Net income

$ (346,000) $ (180,000)

Bretz, Keane Inc.
Company Retained earnings 1/1.
$ (797,000)
$
(500,000)
Net income(above).
(346,000)
(180,000)
Dividends paid.
143,000 60,000 Retained earnings 12/31.
$(1,000,000)
$
(620,000)
Currentassets.
$ 224,000 $
190,000 Investment in Keane Company.
994,500 -0-
Trademarks.
106,000 600,000 Copyrights.
210,000 300,000 Equipment (net).
380,000 110,000 Total assets.
$1,914,500 $
1,200,000 Liabilities.
$ (453,000)
$
(200,000)
Commonstock.
(400,000)
(300,000)
Additional paid-in capital.
(60,000)
(80,000)
Additional paid-in capital-step acquisition . . .
(1,500)
-0-
Retained earnings 12/31.
(1,000,000)
(620,000)
Total liabilities and equities.
$(1,914,500)
$(1,200,000)

a. Show the journal entry Bretz made to record its January 1, 2010, acquisition of an additional 30 percent of Keane Company shares.

b. Prepare a schedule showing how Bretz determined the Investment in Keane Company balance as of December 31,2010.

c. Prepare a consolidated worksheet for Bretz, Inc., and Keane Company for December 31,2010.