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On December 31, 2012. Paxon Corporation acquired all of the outstanding common stock of Saxon Company for 109 bilion Cash Pronuses the complete equity method

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On December 31, 2012. Paxon Corporation acquired all of the outstanding common stock of Saxon Company for 109 bilion Cash Pronuses the complete equity method to report investment The trial balances of Paxon and Saxon at December 31, 2013. are shown below Dron (in millions Paxon Saxon Cash and receivable 11,550 5400 inventory 1,130 470 Equity methodiovestments investment in San 07 Land 325 150 Boldings and edimento 1800 575 Current 010600 ning teen die 12.500 2250 Commons par value 12501 650 Additiona padin capital 00117 Retained earnings ngary 11,20514231 Dividendi 250 50 Sales (15.000.000 Encore Son (121 Ono secure Gamon action 11001 Cost of toodi od 11000 4000 Decrecion expense 150 most expense 129 13 Other in Den 3 00 Totais 50 19 20 Several of Saxon's assets and liabilities had fair values different from their bookvales at the acquisition date, as fotos fin millions Fair Valueless Book Value natory 550 Equity method wesents com Land things and met 20 years, the Longtem de yarash 150 1551 (a) Prepare a schedule to compute equity in net income of Saxon for 2013, and the December 31, 2013, balance for the investment in Saxon, as reported on Paxon's books Instructions: 1. Enter all answers in millions. Round all answers to the nearest million, when appropriate 2. Use negative signs with answers that reduce equity in net income and the investment account balance Calculation of Equity in Net Income for 2013 (in millions) Saxon's reported net income for 2013 5 172 Bevaluation writeots twentory (50) Equity method investments 25 Buildings and equipment X Long-term debt (11) Equity in net income of Saxon $ X Calculation of Investment Balance, December 31, 2013 (in millions) Investment balance, December 31, 2012 5 OX Equity in net income for 2013 128.5 X Dividends for 2013 250 x Investment balance December 31, 2013 S 1,2785 X (b) Use a working paper to consolidate the trial balances of Paxon and Saxon at December 31, 2013. Remember to use negative signs with your credit balance answers in the Consolidated Balances column Consolidation Working Paper Accounts Taken from Books Eliminations Paxon Saxon (in millions) Consolidated Balances Dr (CT) Dr (CI) Debit Credit Dr (CT) Cash and receivables $1,550 $400 $ 0X Inventory 1,130 470 (R) 0 x (0-1) 0 X Equity method investments - (0-2) O X (R) 0 Investment in Saxon 1.078 0X (C) 0 0X (E) 0 X (R) Land 325 150 (R) 0 X OX Buildings and equipment, net 1,800 575 (R) OX 0X (0-3) OX Current liabilities (1,010) (600) OX Long-term debt (2,500) (225) (R) 0 X 0X (0-4) OX Common stock (250) (50) (E) 0X OX Additional paid in capital (600) (175) (E) OX OX Retained earnings, Jan. 1 (1,205) (423) (E) 0 x OX Dividends 250 50 0x (C) OX Sales revenue (15,000) (5,000) 0X Equity in net income of Saxon (128) 0 0 OX Gain on sale of securities (5) OX (0-2) Gain on acquisition (100) OX 13,000 Cost of goods sold 4,000 (0-1) OX OX Depreciation expense 150 OX 20 (0-3) 13 (0.4) OX Interest expense 0 x Other operating expenses OX 1,385 800 SO OV $0 O X5 OX Total ( 125 epare the consoletowance shtetesanostantemento come and retained earnings are center 2015 INSTRUCTIONS: Do not use negative signs with any of your answers below for the balance sheet and income statement. Consolidated Income Statement Year Ended December 31, 2013 (in millions) Sales $ OX Cost of goods sold OX Gross margin OX Operating expenses Depreciation expense $ 0 x Interest expense OX Other operating expenses OX OX Income before other gains OX Gain on sale of securities Gain on acquisition OX Net income $ OX HINT: The answer for Retained Earnings is $1.523. Consolidated Balance Sheet December 31, 2013 (in millions) Assets Cash and receivables $ OX Inventory OX Land OX Buildings and equipment, net OX Total assets $ OX Liabilities and Stockholders' Equity Current liabilities $ OX Long-term debt OX Common stock OX Additional paid in capital OX Retained earnings OX Total abilities and stockholders' equity 5 OX

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