On January 1, 2022, Paxon Corporation acquired all of the outstanding common stock of Saxon Company for $2 billion cash. Paxon uses the complete equity method to report its investment. The trial balances of Paxon and Saxon at December 31, 2022, are shown below: Dr(Cr) (in millions) Paxon Saxon Cash and receivables $3,050 $855 Inventory 2,260 530 Equity method investments Investment in Saxon 2,635 Land 650 300 Buildings and equipment (net) 3,600 1,150 Current liabilities (2.020) (1.200) Long-term debt (5.000) (450) Common stock, par value (500) (50) Additional paid-in capital (1.200) (200) Retained earnings, January 1 (2.410) (600) Dividends 500 250 Sales revenue (30,000) (12.000) Equity in net income of Saxon (685) Gain on sale of of equity method investments (150) Gain on acquisition (200) Cost of goods sold 26.000 8.500 Depreciation and amortization expense 300 40 Interest expense 250 25 Other operating expenses 2.770 3.000 Totals 50 50 Several of Saxon's assets had fair values different from their book values at the acquisition date, as follows: (in millions) Inventory (FIFO) (sold in 2022) Equity method investments (sold in 2022) Land Buildings and equipment, net (20 years, straight-line) Fair Value less Book Value $(400) (100) 275 500 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 to compute equity in net income of Saxon for 2022, and the December 31, 2022 balance for Investment in Saxon, as reported on Paxon's books, 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 2022 (in millions) Saxon's reported net income for 2022 $ Revaluation write-offs: Inventory Equity method investments Buildings and equipment Identifiable intangibles Equity in net income of Saxon $ Calculation of Investment Balance, December 31, 2022 (in millions) Investment balance, January 1, 2022 $ Equity in net income for 2022 Dividends for 2022 Investment balance, December 31, 2022 $ (b) Use 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. Consolidation Working Paper Accounts Taken From Books Paxon Saxon (in millions) Dr (Cr) Dr (Cr) Cash and receivables $3,050 $855 Inventory 2,260 530 (0-1) Long-Term investments (R) Investment in Saxon 2,635 Eliminations Debit Credit Consolidated Balances Dr (Cr) (R) (0-2) (C) (E) (R) Land 650 300 (R) Buildings and equipment, net 3,600 1,150 (R) (0-3) Identifiable intangibles (R) (0-4) Current liabilities (2.020) (1,200) Long-term debt (5,000) (450) Common stock (500) (50) (E) Additional paid-in capital (1.200) (200) Retained earnings, jan. 1) (2.410) (600) www (E) (E) Dividends 500 250 (C) Sales revenue (30,000) (12.000) Equity in net income of Saxon (685) " Gain on sale of equity method investments (0) (150) (0-2) Gain on acquisition (200) Cost of goods sold 26,000 8.500 (0-1) Depreciation and amortization expense 300 40 (0-3) (0-4) interest expense Other operating expenses Total 250 25 2770 50 3,000 50 $ (c) Prepare the consolidated balance sheet at December 31, 2022, and the consolidated income statement for 2022. INSTRUCTIONS: Do not use negative signs with any of your answers below for the balance sheet and income statement. Sales Consolidated Income Statement Cost of goods sold Gross margin Year Ended December 31, 2022 Operating expenses: (in millions) Depreciation and amortization expense Interest expense Other operating expenses income before other gains Gain on sale of equity method investments Gain on acquisition Net income $ $ S Assets Consolidated Balance Sheet December 31, 2022 (in millions) Cash and receivables Inventory Land Buildings and equipment, net Identifiable intangibles Total assets Liabilities and Stockholders' Equity Current liabilities Long-term debt $ $ LA $ Common stock Additional paid-in capital Retained earnings Total liabilities and shareholders' equity $