On January 1, 2016, Paxon Corporation acquired 90 percent of the outstanding common stock of Saxon Company for \($1,620\) million cash. The fair value of the 10 percent noncontrolling interest in Saxon was estimated to be \($180\) million at the date of acquisition. Paxon uses the complete equity method to report its investment. The trial balances of Paxon and Saxon at December 31, 2016, appear below:

Several of Saxon’s assets and liabilities had fair values different from their book values at the acquisition date, as follows:

Required

a. Prepare a schedule computing the gain on acquisition.

b. Prepare a schedule calculating the equity in net income of Saxon for 2016, reported on Paxon’s books, and the noncontrolling interest in net income for 2016, to be reported on the consolidated income statement for 2016.

c. Prepare a working paper to consolidate the trial balances of Paxon and Saxon at December 31, 2016.

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(in millions) Cash and receivables. Inventory... Marketable securities. Paxon $ 3,270 2,260 - Dr (Cr) Saxon 800 940 Investment in Saxon. Land.. 1,962.2 650 300 Current liabilities... Buildings and equipment, net Long-term debt 3,600 1,150 (2,020) (1,200) (5,000) (450) Common stock, par value (500) (100) Additional paid-in capital. (1,200) (350) Retained earnings, January 1.. (2,610) (845) Dividends. 500 100 Sales revenue.. (30,000) (10,000) Equity in net income of Saxon (232.2) Gain on sale of securities. Cost of goods sold... Depreciation expense.. Interest expense... Other operating expenses Totals - (10) 26,000 8,000 300 40 250 25 2,770 1,600 0 0