On January 1, 2014, Allan Company bought a 15 percent interest in Sysinger Company. The acquisition price of $184,500 reflected an assessment that all of Sysinger’s accounts were fairly valued within the company’s accounting records. During 2014, Sysinger reported net income of $100,000 and declared cash dividends of $30,000. Allan possessed the ability to influence significantly Sysinger’s operations and, therefore, accounted for this investment using the equity method.

On January 1, 2015, Allan acquired an additional 80 percent interest in Sysinger and provided the following fair-value assessments of Sysinger’s ownership components:

Consideration transferred by Allan for 80% interest . . . . . . . . . . . . . $1,400,000

Fair value of Allan’s 15% previous ownership . . . . . . . . . . . . . . . . . . 262,500

Noncontrolling interest’s 5% fair value . . . . . . . . . . . . . . . . . . . . . . . 87,500

Total acquisition-date fair value for Sysinger Company . . . . . . . . . . $1,750,000

Also, as of January 1, 2015, Allan assessed a $400,000 value to an unrecorded customer contract recently negotiated by Sysinger. The customer contract is anticipated to have a remaining life of 4 years. Sysinger’s other assets and liabilities were judged to have fair values equal to their book values. Allan elects to continue applying the equity method to this investment for internal reporting purposes.
At December 31, 2015, the following financial information is available for consolidation:
a. How should Allan allocate Sysinger’s total acquisition-date fair value (January 1, 2015) to the assets acquired and liabilities assumed for consolidation purposes?
b. Show how the following amounts on Allan’s preconsolidation 2015 statements were derived:
• Equity in earnings of Sysinger.
• Gain on revaluation of Investment in Sysinger to fair value.
• Investment in Sysinger.
c. Prepare a worksheet to consolidate the financial statements of these two companies as of
December 31, 2015.
At year-end, there were no intra-entity receivables orpayables.

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Allan Company Sysinger Company $ (931,000) (380,000) 230,000 Revenues Operating expenses Equity earnings of Sysinger. Gain on revaluation of Investment in Sysinger 615,000 (47,500) to fair value (67,500) Net income Retained earnings, January 1 Net income Dividends declared $431,000 150,000 $ (965,000) $(600,000) (431,000) 150,000) 140,000 40,000 Retained earnings, December 31 $(1,256,000) $ (710,000) 288,000 540,000 Current assets... Investment in Sysinger (equity method) Property, plant, and equipment. Patented technology Customer contract 1,672,000 826,000 850,000 590,000 370,000 Total assets Liabilities Common stock Additional paid-in capital Retained earnings, December 31 $3,636,000 1,500,000 $(1,300,000) $(90,000) (900,000 (500,000) (180,000) (200,000) (710,000) $(3,636,000) $(1,500,000) (1,256,000) Total liabilities and equities