On January 1, 2016, Paxon Corporation acquired all of the outstanding common stock of Saxon Company for \($1.8\) billion cash. The balance sheets of Paxon and Saxon, immediately prior to the combination, are shown below:

Several of Saxon’s assets and liabilities had fair values that were different from their book values. Estimates of the fair values of these items follow:

Required

a. Calculate the gain on acquisition in this bargain purchase.

b. Prepare a working paper to consolidate the balance sheets of Paxon and Saxon at January 1, 2016.

c. Present the consolidated balance sheet, in good form, at the date of acquisition.

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Balance Sheets (in millions) Assets Cash and receivables...... Inventory..... Long-term investments Land....... Buildings and equipment... Less accumulated depreciation. Total assets Liabilities and Stockholders' Equity Current liabilities.... Long-term debt Common stock, par value Additional paid-in capital Retained earnings Total liabilities and equity. Paxon Saxon $2,860 $ 720 1,700 900 300 650 175 $3,400 (1,000) 2,400 600 (net) $7,610 $2,695 $1,500 $1,000 2,000 400 500 100 1,200 350 2,410 845 $7,610 $2,695