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On January 1 , 2 0 2 2 , Paxon Corporation acquired all of the outstanding common stock of Saxon Company for $ 2 billion

On January 1,2022, Paxon Corporation acquired all of the outstanding common stock of Saxon Company for $2 billion cash. The balance sheets of Paxon and Saxon, immediately prior to the combination, are shown below:
Balance Sheets (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 liabilities 1,5001,000
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 Saxons assets 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 assets valued at $875 million.
Required
(a) Calculate the gain on acquisition in this bargain purchase.
$Answer million
(b) Prepare a working paper to consolidate the balance sheets of Paxon and Saxon at January 1,2022.
Remember to use negative signs with your credit balance answers in the Dr (Cr) columns.
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 Answer Answer
Inventory Answer Answer Answer (R) Answer
Equity method investments -- Answer (R) Answer Answer
Investment in Saxon Answer Answer (E)--
Answer (R)
Land Answer Answer (R) Answer Answer
Buildings and equipment, net Answer Answer (R) Answer Answer
Identifiable intangibles ----(R) Answer Answer
Current liabilities Answer Answer Answer
Long-term debt Answer Answer Answer
Common stock, par value Answer Answer (E) Answer Answer
Additional paid-in capital Answer Answer (E) Answer Answer
Retained earnings Answer Answer (E) Answer Answer
Total Answer Answer Answer Answer Answer
(c) Present the consolidated balance sheet, in good form, at the date of acquisition.
Paxon Corporation and Subsidiary
Consolidated Balance Sheet
Date of Acquisition
(in millions)
Assets Liabilities
Cash and receivables Answer Current liabilities Answer
Inventory Answer Long-term debt Answer
Long-term investments Answer Total liabilities Answer
Land Answer
Buildings and equipment, net Answer Shareholders equity
Identifiable intangibles Answer Common stock, par value Answer
Additional paid-in capital Answer
Retained earnings Answer
Total equity Answer
Total assets Answer Total liabilities and equity Answer

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