Prepare a consolidated worksheet for Bretz, Inc., and Keane Company for December 31, 2011.

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On January 1, 2010, 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 2010, Keane reported net income of $150,000 and paid cash dividends of $80,000. On January 1, 2011, Bretz bought an additional 30 percent interest in Keane for $300,000.

The following financial information is for these two companies for 2011. Keane issued no additional capital stock during either 2010 or 2011.

Bretz,
Inc.

Keane
Company

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)

a. Show the journal entry Bretz made to record its January 1, 2011, acquisition of an additional 30 percent of Keane Company shares.

b. Prepare a schedule showing how Bretz determined the Investment in Keane Company balance as of December 31, 2011.

c. Prepare a consolidated worksheet for Bretz, Inc., and Keane Company for December 31, 2011.

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