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 $19.5 per share). As of that date, Bradford had stockholders' equity totaling $145,450. Land shown on Bradford's accounting records was undervalued by $10,700. Equipment (with a five-year remaining life) was undervalued by $6,850. A secret formula developed by Bradford was appraised at $32,000 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.

Allen

CompanyBradford

CompanyRevenues$(653,000)$(212,500)Cost of goods sold216,00079,000Depreciation expense135,00060,900Subsidiary earnings(69,630)0Net income$(371,630)$(72,600)Retained earnings, 1/1/18$(792,000)$(105,000)Net income (above)(371,630)(72,600)Dividends declared175,50040,000Retained earnings ,12/31/18$(988,130)$(137,600)Current assets$454,000$99,000Investment in Bradford237,3000CompanyLand430,00066,600Buildings and equipment (net)814,000182,000Total assets$1,935,300$347,600Current liabilities$(257,170)$(145,000)Common stock(600,000)(60,000)Additional paid-in capital(90,000)(5,000)Retained earnings, 12/31/18(988,130)(137,600)Total liabilities and equity$(1,935,300)$(347,600)

1. a-1.Complete the table to show the allocation of the fair value in excess of book value.
2. a-2.What balance will Allen show in its Subsidiary Earnings account?
3. b.Complete the worksheet by consolidating the financial information for these two companies.