Question
Consolidated Balance Sheet Working Paper, Date of Acquisition, Bargain Purchase On January 1, 2016, Paxon Corporation acquired 80 percent of the outstanding common stock of
Consolidated Balance Sheet Working Paper, Date of Acquisition, Bargain Purchase
On January 1, 2016, Paxon Corporation acquired 80 percent of the outstanding common stock of the Saxon Company for $4 billion cash. The balance sheets of Paxon and Saxon, immediately prior to the combination, follow:
(in millions)PaxonSaxonAssetsCash and receivables$11,440$ 2,880Inventory6,8003,600Equity method investments--1,200Land2,600700Buildings and equipment, net9,6002,400Total assets$ 30,440$10,780Liabilities and stockholders' equityCurrent liabilities$ 6,000$ 4,000Long-term debt8,0001,600Common stock, par value2,000400Additional paid-in capital4,8001,400Retained earnings9,6403,380Total liabilities and stockholders' equity$30,440$10,780
Several of Saxon's assets and liabilities had fair values that were different from their book values. Estimates of the fair values of these items follow:
(in millions)Estimated fair valueInventory$ 4,000Equity method investments1,000Land1,680Buildings and equipment, net3,600Long-term debt1,160
The estimated fair value of the noncontrolling interest in Saxon is $800 million.
a. Calculate the gain on acquisition and prepare Paxon's entry to record the acquisition (in millions)
- When appropriate, use negative signs with your revaluation answers (left column only).
- Do not use negative signs with your answers in the right column.
- Enter answers in millions.
Acquisition costAnswer
Fair value of noncontrolling interestAnswer
TotalAnswer
Book value of SaxonAnswer
Revaluations:InventoryAnswer
Equity method investmentsAnswer
LandAnswer
Buildings and equipment, netAnswer
Long-term debtAnswer
Fair value of identifiable net assetsAnswer
Gain on acquisitionAnswer
Paxon's acquisition entry (in millions):
General JournalDescriptionDebitCreditAnswer
Investment in Saxon
Goodwill
Gain on acquisition
Noncontrolling interest
Acquisition cost
Answer
Answer
CashAnswer
Answer
Answer
Investment in Saxon
Goodwill
Gain on acquisition
Noncontrolling interest
Acquisition cost
Answer
Answer
b. Prepare a working paper to consolidate the balance sheets of Paxon and Saxon at January 1, 2016.
Remember to use negative signs with your credit balance answers in the Dr (Cr) columns.
Consolidation Working PaperAccounts Taken From BooksEliminations(in millions)Paxon
Dr (Cr)Saxon
Dr (Cr)DebitCreditConsolidated Balances
Dr (Cr)Cash and receivablesAnswer
Answer
Answer
InventoryAnswer
Answer
(R)Answer
Answer
Equity method investments--Answer
Answer
(R)Answer
Investment in SaxonAnswer
--Answer
(E)Answer
Answer
(R)--LandAnswer
Answer
(R)Answer
Answer
Buildings and equipment, netAnswer
Answer
(R)Answer
Answer
Current liabilitiesAnswer
Answer
Answer
Long-term debtAnswer
Answer
(R)Answer
Answer
Common stock, par valueAnswer
Answer
(E)Answer
Answer
Additional paid-in capitalAnswer
Answer
(E)Answer
Answer
Retained earningsAnswer
Answer
(E)Answer
Answer
Noncontrolling interest----(R)Answer
Answer
(E)Answer
TotalAnswer
Answer
Answer
Answer
Answer
c. Present the consolidated balance sheet, in good form, at the date of acquisition (in millions).
- Do not use negative signswith any of your answers.
- Enter answers in millions.
Consolidated Balance Sheet
January 1, 2016(in millions)AssetsCash and receivablesAnswer
InventoryAnswer
Current assetsAnswer
Equity method investmentsAnswer
LandAnswer
Buildings and equipment, netAnswer
Total assetsAnswer
Liabilities and stockholders' equityCurrent liabilitiesAnswer
Long-term debtAnswer
Total liabilitiesAnswer
Stockholders' equityPaxon stockholders' equity:Common stockAnswer
Additional paid-in capitalAnswer
Retained earningsAnswer
Total Paxon stockholders' equityAnswer
Noncontrolling interestAnswer
Total stockholders' equityAnswer
Total liabilities and stockholders' equityAnswer
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Statistics For Business And Economics
Authors: James T. McClave, P. George Benson, Terry T Sincich
12th Edition
032182623X, 978-0134189888, 134189884, 978-0321826237
