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On January 1 , 2 0 2 2 , Paxon Corporation acquired 9 0 percent of the outstanding common stock of Saxon Company for $
On January Paxon Corporation acquired percent of the outstanding common stock of Saxon Company for $ billion cash. The fair value of the percent noncontrolling interest in Saxon was estimated to be $ million at the date of acquisition. Paxon uses the complete equity method to report its investment. The trial balances of Paxon and Saxon at December appear below:
DrCr
in millions Paxon Saxon
Cash and receivables $ $
Inventory
Equity method investments
Investment in Saxon
Land
Buildings and equipment, net
Current liabilities
Longterm debt
Common stock, par value
Additional paidin capital
Retained earnings, January
Dividends
Sales revenue
Equity in net income of Saxon
Gain on acquisition
Gain on sale of securities
Cost of goods sold
Depreciation and amortization expense
Interest expense
Other operating expenses
Total $ $
Several of Saxons assets had fair values different from their book values at the acquisition date, as follows:
in millions Fair Value less
Book Value
Inventory FIFOsold in $
Equity method investmentssold in
Land
Buildings and equipment, net years, straightline
In addition, Saxon had previously unrecorded identifiable intangible assets valued at $ million, with a year life, straightline.
Required
a Prepare a schedule computing the gain on 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, using decimal places, if appropriate.
Calculation of gain on acquisition
Acquisition cost Answer
Fair value of noncontrolling interest Answer
Answer
Book value Answer
Revaluations:
Inventory Answer
Equity method investments Answer
Land Answer
Building and equipment Answer
Identifiable intangibles Answer
Answer
Gain on acquisition Answer
b Prepare a schedule calculating the equity in net income of Saxon for reported on Paxons books, and the noncontrolling interest in net income for to be reported on the consolidated income statement for
Use negative signs with answers that reduce net income amounts.
Enter answers in millions, using decimal places, if appropriate.
in millions
Total
Equity in NI Noncontrolling
interest in NI
Saxon's reported net income for Answer
Answer
Answer
Revaluation writeoffs
Inventory Answer
Answer
Answer
Equity method investments Answer
Answer
Answer
Buildings and equipment Answer
Answer
Answer
Identifiable intangibles Answer
Answer
Answer
Answer
Answer
Answer
c Prepare a working paper to consolidate the trial balances of Paxon and Saxon at December
Remember to use negative signs with your credit balance answers in the Consolidated Balances column.
Enter answers in millions, using decimal places, if appropriate.
Consolidation Working Paper
Accounts Taken From Books Eliminations
in millions
Paxon
Dr Cr
Saxon
Dr Cr
Debit
Credit Consolidated
Balances
Dr Cr
Cash and receivables $ $ Answer
Inventory O Answer
Answer
R Answer
Equity method investments R Answer
Answer
O Answer
Identifiable intangible assets R Answer
Answer
O Answer
Investment in Saxon Answer
C Answer
Answer
E
Answer
R
Land R Answer
Answer
Buildings and equipment, net R Answer
Answer
O Answer
Current liabilities Answer
Longterm debt Answer
Common stock E Answer
Answer
Additional paidin capital E Answer
Answer
Retained earnings, Jan. E Answer
Answer
Noncontrolling interest Answer
E Answer
Answer
R
Answer
N
Dividends Answer
C Answer
Answer
N
Sales revenue Answer
Equity in net income of Saxon C Answer
Answer
Gain on acquisition Answer
Gain on sale of securities O Answer
Answer
Cost of goods sold Answer
O Answer
Depreciation and amortization expense O Answer
Answer
O Answer
Interest expense Answer
Other operat
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