Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Padre, Inc., buys 80 percent of the outstanding common stock of Sierra Corporation on January 1, 2018, for $791,520 cash. At the acquisition date, Sierra's

image text in transcribedimage text in transcribedimage text in transcribed

Padre, Inc., buys 80 percent of the outstanding common stock of Sierra Corporation on January 1, 2018, for $791,520 cash. At the acquisition date, Sierra's total fair value, including the noncontrolling interest, was assessed at $989,400 although Sierra's book value was only $638,000. Also, several individual items on Sierra's financial records had fair values that differed from their book values as follows: Land Buildings and equipment (10-year remaining life) Copyright (20-year remaining life) Notes payable (due in 8 years) Book Value $ 65,200 295,000 104,000 (187,000) Fair Value $ 307,200 276,000 218,000 (172,600) For internal reporting purposes, Padre, Inc., employs the equity method to account for this investment. The following account balances are for the year ending December 31, 2018, for both companies. $ Padre $ (1,401,180) 770,000 264,000 Sierra (647,000) 426,000 15,500 5,200 5,300 Revenues Cost of goods sold Depreciation expense Amortization expense Interest expense Equity in income of Sierra Net income Retained earnings, 1/1/18 Net income Dividends declared Retained earnings, 12/31/18 Current assets Investment in Sierra Land Buildings and equipment (net) $ $ 50,700 (151,520) $ (468,000) $ (1,492,500) (468, 000) 260,000 $ (1,700,500) 998,460 891,040 349,000 944,000 (195,000) (478,000) (195,000) 65,000 (608,000) 681,500 $ $ 65,200 279,500 149, vuu 944,000 Laru Buildings and equipment (net) Copyright Total assets Accounts payable Notes payable Common stock Additional paid-in capital Retained earnings (above) Total liabilities and equities $ 3,182,500 $ (205,000) (527,000) (300,000) (450,000) (1,700,500) $ (3,182,500) UJ, zuu 279,500 98,800 $ 1,125,000 $ (170,000) (187,000) (100,000) (60,000) (608,000) $ (1,125,000) At year-end, there were no intra-entity receivables or payables. Using the acquisition method, prepare the worksheet to consolidate these two companies. (For accounts where multiple consolidation entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet. Amounts in the Debit and Credit columns should be entered as positive. Negative amounts for the Noncontrolling Interest and Consolidated Totals columns should be entered with a minus sign.) PADRE INC., AND SIERRA CORPORATION Consolidated Worksheet For Year Ending December 31, 2018 Consolidation Entries Accounts Padre Sierra Debit Credit Noncontrolling Consolidated Interest Totals Revenues Cost of goods sold Depreciation expense $(1,401,180) 770,000 264,000 $ (647,000) 426,000 15,500 264,000 0 50,700 (151,520) $ (468,000) 15,500 5,200 5,300 0 $ (195,000) $ S (478,000) (195,000) 65,000 $ (608,000) $ 681,500 $ Depreciation expense Amortization expense Interest expense Equity in income of Sierra Separate company net income Consolidated net income NI to noncontrolling interest NI to Padre Company Retained earnings 1/1 Net income (above) Dividends declared Retained earnings 12/31 Current assets Investment in Sierra Land Buildings and equipment (net) Copyright Total assets Accounts payable Notes payable NCI in Sierra 1/1 NCI in Sierra 12/31 Common stock Additional paid-in capital 0 $(1,492,500) (468,000) 260,000 $(1,700,500) $ 998,460 891,040 349,000 944,000 0 $ 3,182,500 $ (205,000) (527,000) 65,200 279,500 98,800 $ 1,125,000 $ (170,000) (187,000) $ 0 (300,000) (450,000) (1 700 500 (100,000)| (60,000) (608 000) Retained earnings 12/31 (above)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

DOD Financial Management The Army Faces Significant Challenges In Achieving Audit Readiness For Its Military Pay

Authors: Government Accountability Office

1st Edition

1492310921, 978-1492310921

More Books

Students also viewed these Accounting questions