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) page 146 Explain how Allen derived the $66,000 balance in the Subsidiary Earnings account. Prepare a worksheet to consolidate the financial information for these two companies.

			Consolidation Entries
Accounts	Allen Co.	Bradford Co.	Debit	Credit	Totals
Income Statement
Revenues	(485,000)	(190,000)
Cost of goods sold	160,000	70,000
Depreciation expense	130,000	52,000	(E)
Amortization expense			(E)
Equity in subsidiary earnings	(66,000)		(I)
Net Income	(261,000)	(68,000)
Statement of Retained Earnings
Retained earnings 1/1	(659,000)	(98,000)	(S)
Net income (above)	(261,000)	(68,000)
Dividends paid	175,500	40,000		(D)
Retained earnings 12/31	(744,500)	(126,000)
Balance Sheet
Current assets	268,000	75,000
Investment in Bradford Co.	216,000		(D)	(S)
				(A)
				(I)
Land	427,500	58,000	(A)
Buildings and equipment (net)	713,000	161,000	(A)	(E)
Formula			(A)	(E)
Total assets	1,624,500	294,000
Current liabilities	(110,000)	(19,000)
Long-term liabilities	(80,000)	(84,000)
Common stock	(600,000)	(60,000)	(S)
Additional paid-in capital	(90,000)	(5,000)	(S)
Retained earnings 12/31	(744,500)	(126,000)
Total Liabilities and Equity	(1,624,500)	(294,000)
Parentheses indicate a credit
balance