On January 1, 2018, Brooks Corporation exchanged $1,296,000 fair-value consideration for all of the outstanding voting stock of Chandler, Inc. At the acquisition date, Chandler had a book value equal to $1,140,000. Chandlers individual assets and liabilities had fair values equal to their respective book values except for the patented technology account, which was undervalued by $276,000 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.

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.

Brooks Corp. Chandler Inc. Income Statement Revenues Cost of goods sold Gain on bargain purchase Depreciation and amortization Equity earnings from Chandler $ (677,500) $ (668,000) 240,000 (120,000) 138,000 253, 000 208,000 0 161,000 () Net income $ (672,500 $ (299,000) Statement of Retained Earnings Retained earnings, 1/1 Net income (above) Dividends declared (1,645,000) $ (840,000) (299,000) (672,500) 150,000 70,000 $ (2,167,500) $(1, 069,000) Retained earnings, 12/31 Balance Sheet Current assets Investment in Chandler Trademarks Patented technology Equipment $156,500 1,599,000 129,000 304,000 684,000 $ 2,872,500 $462,000 262,000 475,000 305,000 $ 1,504,000 Total assets Liabilities Common stock Retained earnings, 12/31 $ (170,000) (135,000) (300,000) (535,000) (2,167,500)(1,069. Total liabilities and equity $ (2,872,500) $(1,504,000)