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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
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)
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