On January 1, 2018, Brooks Corporation exchanged $1,136,500 fair-value consideration for all of the outstanding voting stock of Chandler, Inc. At the acquisition date, Chandler had a book value equal to $1,032,500. Chandlers individual assets and liabilities had fair values equal to their respective book values except for the patented technology account, which was undervalued by $234,000 with an estimated remaining life of six years. The Chandler acquisition was Brookss 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, 2018, each company submitted the following financial statements for consolidation. Dividends were declared and paid in the same period.

	Brooks Corp.				Chandler Inc.
Income Statement
Revenues	$	(759,500	)		$	(553,000	)
Cost of goods sold		216,000				178,000
Gain on bargain purchase		(130,000	)			0
Depreciation and amortization		141,000				166,000
Equity earnings from Chandler		(170,000	)			0
Net income	$	(702,500	)		$	(209,000	)
Statement of Retained Earnings
Retained earnings, 1/1	$	(1,815,000	)		$	(732,500	)
Net income (above)		(702,500	)			(209,000	)
Dividends declared		200,000				50,000
Retained earnings, 12/31	$	(2,317,500	)		$	(891,500	)
Balance Sheet
Current assets	$	504,000			$	303,500
Investment in Chandler		1,386,500				0
Trademarks		126,000				294,000
Patented technology		361,000				420,000
Equipment		660,000				356,000
Total assets	$	3,037,500			$	1,373,500
Liabilities	$	(185,000	)		$	(182,000	)
Common stock		(535,000	)			(300,000	)
Retained earnings, 12/31		(2,317,500	)			(891,500	)
Total liabilities and equity	$	(3,037,500	)		$	(1,373,500	)

Note: Parentheses indicate a credit balance.

a. Determine the following account balances:

• Gain on bargain purchase.
• Earnings from Chandler.
• Investment in Chandler.

b. Prepare a December 31, 2018, consolidated worksheet for Brooks and Chandler.

Prepare a December 31, 2018, consolidated worksheet for Brooks and Chandler. (For accounts where multiple consolidation entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet.)

Determine the following account balances. Gain on bargain purchase Equity earnings in Chandler Investment in Chandler 12/31/18 BROOKS AND CHANDLER Consolidation Worksheet For Year Ending December 31, 2018 Consolidation Entries Consolidated Brooks Accounts Chandler Debit Credit Totals Income Statement Revenues Cost of goods sold $ (759,500) $ (553,000) 216,000 178,000 Gain on bargain purchase Depreciation and amortization (130,000) 141,000 166,000 Equity earnings in Chandler (170,000) S (702,500) $ (209,000) Net income Statement of Retained Earnings $ (732,500) Retained earnings, 1/1 (1,815,000) Net income Dividends declared (702,500) (209,000) 200,000 50,000 $ (891,500) (2,317,500) Retained earnings, 12/31 Balance Sheet Current assets 504,000 303,500 Investment in Chandler 1,386,500 126,000 Trademarks 294,000 Patented technology 361,000 420,000 Equipment 660,000 356,000 $ 3,037,500 1,373,500 Total assets $ (185,000) (182,000) Liabilities Common stock (535,000) (300,000) Retained earnings, 12/31 (2,317,500) (891,500) $ (3,037,500) Total liabilities and equity $ (1,373,500) Determine the following account balances. Gain on bargain purchase Equity earnings in Chandler Investment in Chandler 12/31/18 BROOKS AND CHANDLER Consolidation Worksheet For Year Ending December 31, 2018 Consolidation Entries Consolidated Brooks Accounts Chandler Debit Credit Totals Income Statement Revenues Cost of goods sold $ (759,500) $ (553,000) 216,000 178,000 Gain on bargain purchase Depreciation and amortization (130,000) 141,000 166,000 Equity earnings in Chandler (170,000) S (702,500) $ (209,000) Net income Statement of Retained Earnings $ (732,500) Retained earnings, 1/1 (1,815,000) Net income Dividends declared (702,500) (209,000) 200,000 50,000 $ (891,500) (2,317,500) Retained earnings, 12/31 Balance Sheet Current assets 504,000 303,500 Investment in Chandler 1,386,500 126,000 Trademarks 294,000 Patented technology 361,000 420,000 Equipment 660,000 356,000 $ 3,037,500 1,373,500 Total assets $ (185,000) (182,000) Liabilities Common stock (535,000) (300,000) Retained earnings, 12/31 (2,317,500) (891,500) $ (3,037,500) Total liabilities and equity $ (1,373,500)