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Consolidated Financial Information Pavement Corp. (Pavement) has been operating since 1998. It is now December 31, 2004, and Pavement is about to prepare consolidated financial
Consolidated Financial Information Pavement Corp. ("Pavement") has been operating since 1998. It is now December 31, 2004, and Pavement is about to prepare consolidated financial statements for Pavement and its subsidiary, Sigur, Co. ("Sigur"). Pavement acquired 80 percent of the outstanding common stock of Sigur on January 1, 2004, for $1,416,000. An independent appraisal indicated that the remaining 20% interest in Sigur is worth $354,000. On the acquisition date, Sigur reported owners' equity of $1,375,000. The fair values of the net assets of Sigur are equal to their book values except for the following: Account Dr (Cr) Book Value Fair Value Inventories $ 350,000 $ 260,000 Land 388,000 408,000 Patents 160,000 210,000 Long-term notes payable (100,000) (90,000) Assumptions on the acquisition date: A1: The tax bases of the net assets are equal to their consolidated financial bases, A2: neither company has any additional notes payable and Sigur's long-term notes payable are interest bearing and are due in full on December 31, 2013. Premiums and discounts are amortized using the straight-line method, A3: all the inventory was sold during 2004, and A4: the patents have a 10-year remaining useful life
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