39. Padre, Inc., buys 80 percent of the outstanding common stock of Sierra Corporation on January 1, 2018,

for $802,720 cash. At the acquisition date, Sierras total fair value, including the noncontrolling interest,

was assessed at $1,003,400 although Sierras book value was only $690,000. Also, several individual

items on Sierras financial records had fair values that differed from their book values as follows:

LO 4-1, 4-5, 4-6

Book Value Fair Value

Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 65,000 $ 290,000

Buildings and equipment

(10-year remaining life). . . . . . . . . . . . . . . . . . . . 287,000 263,000

Copyright (20-year remaining life). . . . . . . . . . . . . 122,000 216,000

Notes payable (due in 8 years). . . . . . . . . . . . . . . (176,000) (157,600)

For internal reporting purposes, Padre, Inc., employs the equity method to account for this investment.

The following account balances are for the year ending December 31, 2018, for both companies.

Padre Sierra

Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(1,394,980) $ (684,900)

Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 774,000 432,000

Depreciation expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 274,000 11,600

Amortization expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 6,100

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,100 9,200

Equity in income of Sierra. . . . . . . . . . . . . . . . . . . . . . . . . . . . (177,120) 0

Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (472,000) $ (226,000)

Retained earnings, 1/1/18. . . . . . . . . . . . . . . . . . . . . . . . . . . . $(1,275,000) $ (530,000)

Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (472,000) (226,000)

Dividends declared. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260,000 65,000

Retained earnings, 12/31/18 . . . . . . . . . . . . . . . . . . . . . . $(1,487,000) $ (691,000)

Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 856,160 $ 764,700

Investment in Sierra. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 927,840 0

Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 360,000 65,000

Buildings and equipment (net). . . . . . . . . . . . . . . . . . . . . . . . 909,000 275,400

Copyright. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 115,900

Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,053,000 $ 1,221,000

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (275,000) $ (194,000)

Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (541,000) (176,000)

Common stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (300,000) (100,000)

Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . (450,000) (60,000)

Retained earnings (above). . . . . . . . . . . . . . . . . . . . . . . . . . . (1,487,000) (691,000)

Total liabilities and equities. . . . . . . . . . . . . . . . . . . . . . . . $(3,053,000) $(1,221,000)

At year-end, there were no intra-entity receivables or payables.

Prepare a worksheet to consolidate the financial statements of these two companies.