51-403-01 Advanced Accounting Chapter 3 Assignment Fall 2022 On January 1, 2021, Alfred, Inc. acquired all of the outstanding voting stock of Kelly Corporation in exchange for $615,000 in cash. At the acquisition date Kelly's stockholders' equity was $465,000 including retained earnings of $225,000. At the acquisition date, the book values of Kelly's assets and liabilities were generally equivalent to their fair values except for the following assets: Asset Equipment Customer lists Trademarks Book Value $560,000 Fair Value Remaining Useful Life $640,000 8 years 0 50,000 4 years 250,000 270,000 indefinite During 2021 Kelly reported the following in its separately prepared financial reports to its parent: Net income Dividends $52,500 7,500 Dividends are declared and paid in the same period. The December 31, 2022 separate financial statements for each company appear below. On that date Alfred owes Kelly 20,000 of Accounts Payable. Parentheses indicate credit balances. Alfred Kelly Income Statement Revenues ($2,100,000) ($660,000) Cost of goods sold Depreciation expense 1,150,000 248,000 465,000 82,500 Amortization expense 50,000 0 Equity earnings of Kelly (90,000) 0 Net income ($742,000) ($112,500) Statement of Retained Earnings Retained earnings 1/1/22 ($1,450,000) ($270,000) Net income (above) (742,000) (112,500) Dividends declared 75,000 13,500 Retained earnings 12/31/22 ($2,117,000) ($369,000) Balance Sheet Cash $215,000 $10,500 Accounts receivable 350,000 22,500 Inventory 445,000 126,000 Investment in Kelly 714,000 0 Equipment 3,000,000 420,000 Customer lists 100,000 0 Trademarks 1,200,000 255,000 Goodwill Total assets 200,000 $6,224,000 0 $834,000