Consolidated Balance Sheet Working Paper, Bargain Purchase

On January $1,2022,$ Paxon Corporation acquired all of the outstanding common stock of Saxon Company for $$2$ billion cash. The balance sheets of Paxon and Saxon, immediately prior to the combination, are shown below:

Balance Sheets $($in millions$)$ Paxon Saxon

Assets

Cash and receivables $$2,860$ $$720$

Inventory $1,700900$

Equity method investments $--300$

Land $650175$

Buildings and equipment, net $2,400600$

Total assets $$7,610$ $$2,695$

Liabilities and Shareholders' Equity

Current liabilities $1,5001,000$

Long$-$term debt $2,000845$

Common stock, par value $50050$

Additional paid$-$in capital $1,200200$

Retained earnings $2,410600$

Total liabilities and shareholders$$ equity $$7,610$ $$2,695$

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

$($in millions$)$ Estimated Fair Value

Inventory $$500$

Equity method investments $400$

Land $450$

Buildings and equipment, net $1,100$

In addition, Saxon had previously unrecorded identifiable assets valued at $$875$ million.

Required

$($a$)$ Calculate the gain on acquisition in this bargain purchase.

Prepare a working paper to consolidate the balance sheets of Paxon and Saxon at January $1,2022.$

Remember to use negative signs with your credit balance answers in the Dr $($Cr$)$ columns.b