On January 1, 2010, Bretz, Inc., acquired 60 percent of the


Question Description:

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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, Keane Inc. 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) Please show the journal entry Bretz made to record its January 1, 2011 acquisition of an additional 30 percent of Keane Company shares.

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