Allen Company acquired 100 percent of Bradford Companys 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 Bradfords 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. Allen Company Bradford Company Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (485,000) $(190,000) Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160,000 70,000 Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130,000 52,000 Subsidiary earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (66,000) 0 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (261,000) $ (68,000) Retained earnings, 1/1/18 . . . . . . . . . . . . . . . . . . . . . . . . . $ (659,000) $ (98,000) Net income (above) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (261,000) (68,000) Dividends declared . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175,500 40,000 Retained earnings, 12/31/18 . . . . . . . . . . . . . . . . . . . . $ (744,500) $(126,000) Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 268,000 $ 75,000 Investment in Bradford Company . . . . . . . . . . . . . . . . . . . 216,000 0 Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 427,500 58,000 Buildings and equipment (net) . . . . . . . . . . . . . . . . . . . . . . 713,000 161,000 Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,624,500 $ 294,000 Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (190,000) $(103,000) Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (600,000) (60,000) Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . (90,000) (5,000) Retained earnings, 12/31/18 . . . . . . . . . . . . . . . . . . . . . . . (744,500) (126,000) Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . $(1,624,500) $(294,000) LO 3-3a, 3-3b, 3-7 LO 3-3, 3-8 Final PDF to printer www.downloadslide.net 146 Chapter 3 hoy44953_ch03_089-154.indd 146 10/27/16 09:14 PM 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.