On January 1, 2013 Schaepman company acquired 100% of Bruinisse company by issuing 10,000 shares of its 10 par value voting stock (having a fair value of 13 per share). At that date Bruinisse had a stockholders equity of 105,000. Land shown on Bruinisses accounting records was undervalued by 10,000. Equipment with a 5-year remaining life was undervalued by 5,000. A secret formula developed by Bruinisse was appraised at 20,000 with an estimated life of 20 years. Furthermore, from the point of view of Schaepman, a deferred liability that was not on the accounting records of Bruinisse was estimated to have a fair value of 10,000., By the end of 2013 this deferred liability did no longer exist.

Following are the separate financial statements for the two companies for the year ending December 31, 2017. On that date Bruinisse had an account payable to Schaepman of 3,000.

	Schaepman	Bruinisse
Current assets	268,000	75,000
Investment in Bruinisse	216,000	-
Land	427,500	58,000
Buildings and equipment	713,000	161,000
Current liabilities	-110,000	-19,000
Long-term liabilities	-80,000	-84,000
Common stock	-600,000	-60,000
Additional paid-in capital	-90,000	-5,000
Retained earnings, December 31, 2017	-744,500	-126,000
	0	0
Retained earnings, January 1, 2017	-659,000	-98,000
Net income	-261,000	-68,000
Dividend declared and paid	175,500	40,000
Retained earnings, December 31, 2017	-744,500	-126,000
Revenues	-485,000	-190,000
Costs of goods sold	160,000	70,000
Depreciation expense	130,000	52,000
Subsidiary earnings	-66,000
Net income	-261,000	-68,000

1. Explain how Schaepman derived the 66,000 balance in the Subsidiary earnings account.

2. Prepare a worksheet to consolidate the financial information for these two companies.