Consolidated Balance Sheet Working Paper, Date of Acquisition, Bargain Purchase

On January $1,2022,$ Paxon Corporation acquired $80$ percent of the outstanding common stock of the Saxon Company for $$1\mathrm{.}7$ billion cash. The balance sheets of Paxon and Saxon, immediately prior to the combination, follow:

$($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 liabilitiess $ $1,500$ $ $1,000$

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 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 value

Inventory $ $500$

Equity method investments $400$

Land $450$

Buildings and equipment, net $1,100$

In addition, Saxon had previously unrecorded identifiable intangible assets valued at $$875$ million. The estimated fair value of the noncontrolling interest in Saxon is $$350$ million.

a$.$ Calculate the gain on acquisition and prepare Paxon$$s entry to record the acquisition.

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 cost Answer

$1,700$

Fair value of noncontrolling interest Answer

$350$

Total Answer

$2,050$

Book value of Saxon Answer

$850$

Revaluations:

Inventory Answer

$(400)$

Equity method investments Answer

$100$

Land Answer

$275$

Buildings and equipment, net Answer

$500$

Identifiable intangibles Answer

$875$

Fair value of identifiable net assets Answer

$2,200$

Gain on acquisition Answer

$150$

Paxon$$s acquisition entry $($in millions$)$:

General Journal

Description Debit Credit

Answer

Investment in Saxon

Answer

$0$

Answer

$0$

Cash Answer

$0$

Answer

$0$

Answer

Answer

$0$

Answer

$0$

b$.$

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