On January 1, 2022, Paxon Corporation acquired 90 percent of the outstanding common stock of Saxon Company for $1.8 billion cash. The fair value of the 10 percent noncontrolling interest in Saxon was estimated to be $150 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 31, 2022, appear below:

Several of Saxons assets had fair values different from their book values at the acquisition date, as follows:

In addition, Saxon had previously unrecorded identifiable intangible assets valued at $875 million, with a 5-year life, straight-line.

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.

(b) Prepare a schedule calculating the equity in net income of Saxon for 2022, reported on Paxons books, and the noncontrolling interest in net income for 2022, to be reported on the consolidated income statement for 2022.

Use negative signs with answers that reduce net income amounts.

Enter answers in millions, using decimal places, if appropriate.

(c) Prepare a working paper to consolidate the trial balances of Paxon and Saxon at December 31, 2022.

Remember to use negative signs with your credit balance answers in the Consolidated Balances column.

Enter answers in millions, using decimal places, if appropriate.

\begin{tabular}{|l|r|r|} \hline \multicolumn{1}{|c}{ (in millions) } & \multicolumn{2}{c|}{ Dr(Cr) } \\ \hline \multicolumn{1}{|c|}{ Paxon } & Saxon \\ \hline Cash and receivables & $3,225 & $855 \\ \hline Inventory & 2,260 & 530 \\ \hline Equity method investments & - & -- \\ \hline Investment in Saxon & 2,441.5 & -- \\ \hline Land & 650 & 300 \\ \hline Buildings and equipment, net & 3,600 & 1,150 \\ \hline Current liabilities & (2,020) & (1,200) \\ \hline Long-term debt & (5,000) & (450) \\ \hline Common stock, par value & (500) & (50) \\ \hline Additional paid-in capital & (1,200) & (200) \\ \hline Retained earnings, January 1 & (2,410) & (600) \\ \hline Dividends & 500 & 250 \\ \hline Sales revenue & (30,000) & (12,000) \\ \hline Equity in net income of Saxon & (616.5) & -- \\ \hline Gain on acquisition & (250) & -- \\ \hline Gain on sale of securities & -- & (150) \\ \hline Cost of goods sold & 26,000 & 8,500 \\ \hline Depreciation and amortization expense & 300 & 40 \\ \hline Interest expense & 250 & 25 \\ \hline Other operating expenses & $0 & 3,000 \\ \hline Total & 50 \\ \hline \end{tabular} Fair Value less \begin{tabular}{|l|r|} \multicolumn{1}{c|}{ (in millions) } & Book Value \\ \hline Inventory (FIFO) (sold in 2022) & $(400) \\ \hline Equity method investments[sold in 2022) & 100 \\ \hline Land & 275 \\ \hline Buildings and equipment, net (20 years, straight-line) & 500 \\ \hline \end{tabular} Calculation of gain on acquisition \begin{tabular}{|l|l|l|} \hline Acquisition cost & & 5 \\ \hline Fair value of noncontrolling interest & & \\ \hline & & \\ \hline Book value & 5 & \\ \hline Revaluations: & & \\ \hline Inventory & & \\ \hline Equity method investments & & \\ \hline Land & & \\ \hline Building and equipment & & \\ \hline Identifiable intangibles & & \\ \hline Gain on acquisition & & \\ \hline \hline \end{tabular}