Maurice Tutor
$15/per page/Negotiable
On January 1, 2012, Bretz, Inc., acquired 60 percent of the outstanding shares of Keane Company for $573,000 in cash. The price paid was proportionate to Keane’s total fair value although at the date of acquisition, Keane had a total book value of $810,000. All assets acquired and liabilities assumed had fair values equal to book values except for a copyright (six-year remaining life) that was undervalued in Keane’s accounting records by $120,000. During 2012, Keane reported net income of $150,000 and paid cash dividends of $80,000. On January 1, 2013, Bretz bought an additional 30 percent interest in Keane for $300,000.
The following financial information is for these two companies for 2013. Keane issued no additional capital stock during either 2012 or 2013.
Â
|
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
$ (402,000) |
 |
$ (300,000) |
|
Operating expenses . . . . . . . . . . . . . . . . . . . . . |
200,000 |
 |
120,000 |
|
Equity in Keane earnings. . . . . . . . . . . . . . . . . . |
(144,000) |
 |
–0– |
|
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . |
$ (346,000) |
 |
$ (180,000) |
|
Retained earnings 1/1 . . . . . . . . . . . . . . . . . . . . |
$ (797,000) |
 |
$ (500,000) |
|
Net income (above) . . . . . . . . . . . . . . . . . . . . . |
(346,000) |
 |
(180,000) |
|
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . |
143,000 |
 |
60,000 |
|
Retained earnings 12/31 . . . . . . . . . . . . . . . . |
$(1,000,000) |
 |
$ (620,000) |
|
Current assets . . . . . . . . . . . . . . . . . . . . . . . . . |
$ 224,000 |
 |
$ 190,000 |
|
Investment in Keane Company . . . . . . . . . . . . . |
994,500 |
 |
–0– |
|
Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . |
106,000 |
 |
600,000 |
|
Copyrights . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
210,000 |
 |
300,000 |
|
Equipment (net) . . . . . . . . . . . . . . . . . . . . . . . . |
380,000 |
 |
110,000 |
|
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . |
$ 1,914,500 |
 |
$ 1,200,000 |
|
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
$ (453,000) |
 |
$ (200,000) |
|
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . |
(400,000) |
 |
(300,000) |
|
Additional paid-in capital . . . . . . . . . . . . . . . . . |
(60,000) |
 |
(80,000) |
|
Additional paid-in capital—step acquisition . . . |
(1,500) |
 |
–0– |
|
Retained earnings 12/31 . . . . . . . . . . . . . . . . . . |
(1,000,000) |
 |
(620,000) |
|
Total liabilities and equities . . . . . . . . . . . . . . |
$(1,914,500) |
 |
$(1,200,000) |
B r etz, Inc. Keane Company
a. Show the journal entry Bretz made to record its January 1, 2013, acquisition of an addi- tional 30 percent of Keane Company shares.
b. Prepare a schedule showing how Bretz determined the Investment in Keane Company bal- ance as of December 31, 2013.
c. Prepare a consolidated worksheet for Bretz, Inc., and Keane Company for December 31,
2013.