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33.On January 1, 2015, Brooks Corporation exchanged $1,183,000 fair-value consideration for all of the outstanding voting stock of Chandler, Inc. At the acquisition date, Chandler had a book value equal to $1,105,000. Chandler?s individual assets and liabilities had fair values equal to their respective book values except for the patented technology account, which was undervalued by $204,000 with an estimated remaining life of 6 years. The Chandler acquisition was Brooks?s only business combination for the year.

In case expected synergies did not materialize, Brooks Corporation wished to prepare for a potential future spin-off of Chandler, Inc. Therefore, Brooks had Chandler maintain its separate incorporation and independent accounting information system as elements of continuing value.

On December 31, 2015, each company submitted the following financial statements for consolidation. Dividends were declared and paid in the same period. Parentheses indicated credit balances.

a.Show how Brooks determined the following account balances:

?Gain on bargain purchase.

?Earnings from Chandler.

?Investment in Chandler.

b.Prepare a December 31, 2015, consolidated worksheet for Brooks and Chandler.

(Hoyle 137)

Hoyle, Joe B., Thomas Schaefer, Timothy Doupnik. Advanced Accounting, 12th Edition. McGraw-Hill Learning Solutions, 01/2014. VitalBook file.

The citation provided is a guideline. Please check each citation for accuracy before use.

Student Name: Class: Problem 03-33 Part a. Acquisition-date fair value allocation and annual excess amortization Consideration transferred Chandler book value Technology undervaluation Acquisition fair value of net assets Gain on bargain purchase Chandler net income Technology amortization Equity earnings in Chandler Fair value of net assets at acquisition-date Equity earnings from Chandler Dividends received Investment in Chandler 12/31/15 Explanatory comments: Part b. Consolidated Worksheet BROOKS AND CONSOLIDATED SUBSIDIARY Consolidation Worksheet For Year Ending December 31, 2015 Brooks Income Statement Revenues Cost of goods sold Gain on bargain purchase Depreciation and amortization Equity earnings from Chandler Net income Statement of Retained Earnings Retained earnings, 1/1 Net income Dividends declared Retained earnings, 12/31 Balance Sheet Current assets Chandler (640,000) 255,000 (126,000) 150,000 (199,000) (560,000) (587,000) 203,000 151,000 (233,000) (1,835,000) (560,000) 100,000 (2,295,000) (805,000) (233,000) 40,000 (998,000) 343,000 432,000 Adjustments & Eliminations Debit Investment in Chandler 1,468,000 - Trademarks Patented technology Equipment Total assets 134,000 395,000 693,000 3,033,000 221,000 410,000 341,000 1,404,000 (203,000) (535,000) (2,295,000) (3,033,000) (106,000) (300,000) (998,000) (1,404,000) Liabilities Common stock Retained earnings, 12/31 Total liabilities and equity Parentheses indicate a credit balance. ents & Eliminations Credit Consolidated - Given Data P03-33: BROOKS CORPORATION Chandler, Inc. outstanding voting stock purchased by Brooks Fair value consideration paid to Chandler Chandler book value at acquisition date Patented technology account undervalued Estimated remaining life in years $ $ $ 100% 1,183,000 1,105,000 204,000 6 Financial Statements December 31, 2015 Brooks Corp. Income Statement Revenues Cost of goods sold Gain on bargain purchase Depreciation and amortization Equity earnings from Chandler Net income Statement of Retained Earnings Retained earnings, 1/1 Net income Dividends declared Retained earnings, 12/31 Balance Sheet Current assets Investment in Chandler Trademarks Patented technology Equipment Total assets Liabilities Common stock Retained earnings, 12/31 Total liabilities and equity $ $ $ $ $ $ $ $ Chandler, Inc. (640,000) $ 255,000 (126,000) 150,000 (199,000) (560,000) $ (587,000) 203,000 151,000 (233,000) (1,835,000) $ (560,000) 100,000 (2,295,000) $ (805,000) (233,000) 40,000 (998,000) 343,000 $ 1,468,000 134,000 395,000 693,000 3,033,000 $ 432,000 221,000 410,000 341,000 1,404,000 (203,000) $ (106,000) (535,000) (300,000) (2,295,000) (998,000) (3,033,000) $ (1,404,000)