Padre, Inc., buys 80 percent of the outstanding common stock of Sierra Corporation on January 1, 2018, for $809,120 cash. At the acquisition date, Sierra's total fair value, including the noncontrolling interest, was assessed at $1,011,400 although Sierra's book value was only $669,000. 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 $ 60,900 330,000 157,000 (167,000) Fair Value $ 320,900 298,000 261,000 (156,600) 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 $ (1,408,440) 716,000 282,000 $ $ 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) Copyright Total assets Accounts payable Notes payable Common stock Additional paid-in capital Retained earnings (above) Total liabilities and equities 51,800 (121,360) $ (480,000) $ (1,455,000) (480,000) 260,000 $ (1,675,000) 1,048,520 878,480 358,000 920,000 Sierra (601,350) 422,000 11,000 7,850 5,500 0 (155,000) (509,000) (155,000) 65,000 (599,000) 585,950 $ 60,900 319,000 149, 150 1,115,000 $ $ 3,205,000 (242,000) (538,000) (300,000) (450,000) (1,675,000) $ (3,205,000) $ (189,000) (167,000) (100,000) (60,000) (599,000) $ (1,115,000) 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 t worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the workshee Amounts in the Debit and Credit columns should be entered as positive. Negative amounts for the Noncontrolling Interest a Consolidated Totals columns should be entered with a minus sign.) Accounts Noncontrolling Interest Consolidated Totals Revenues Cost of goods sold 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) PADRE INC., AND SIERRA CORPORATION Consolidated Worksheet For Year Ending December 31, 2018 Consolidation Entries Padre Sierra Debit Credit $(1,408,440) $ (601,350) 716,000 422,000 282,000 11,000 7,850 51,800 5,500 (121,360) $ (480,000) $ (155,000) $(1,455,000) $ (509,000) (480,000) (155,000) 65,000 $ (599,000) $ 585,950 260,000 $(1,675,000) $ 1,048,520 878,480 358,000 920,000 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 Retained earnings 12/31 (above) Total liabilities and stockholders' equity 60,900 319,000 149, 150 $ 1,115,000 $ (189,000) (167,000) $ 3,205,000 $ (242,000) (538,000) (300,000) (450,000) (1,675,000) $ (3,205,000) (100,000) (60,000) (599,000) $(1,115,000) $ 0 $ 0
