Padre, Inc., buys 80 percent of the outstanding common stock of Sierra Corporation on January 1, 2021, for $754,080 cash. At the acquisition date, Sierra's total fair value, including the noncontrolling interest, was assessed at $942,600 although Sierra's book value was only $659,000. 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 1ste) Copyright (20-year remaining life) Notes payable (due in 8 years) Book Value $ 63,000 355,000 137,000 (155,000) Fair Value $ 297,000 311,000 217,000 (141,400) 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, 2021, for both companies. Revenues Coat of goods sold Depreciation expense Amortization expense Interest expense Equity in income of Sierra Net income Retained earnings, 1/1/21 Net income Dividends declared Retained earnings. 12/31/21 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) Padre ${1,427,540) 752,000 292,00 0 43,500 (174.960 $(515,000) $(1,362,500) (515,000) 260,000 $(1,617,500) $ 941,460 877,040 308,000 924,000 Sierra $ (657,900) 413,000 11,500 6,850 6.550 0 $(220,000) $ (499,000) (220,000) 65,000 $ (654,000) $ 650, 350 0 63,000 343,500 130,150 $ 1,187,000 $ (218,000) (155,000) (100,000) (60,000) (654,000) $ 3,050, 500 $ (218,000) (465,000) (300,000) (450.000) (1,617.500) Padre, Inc., buys 80 percent of the outstanding common stock of Sierra Corporation on January 1, 2021, for $754,080 cash. At the acquisition date, Sierra's total fair value, including the noncontrolling interest, was assessed at $942,600 although Sierra's book value was only $659,000. 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 1ste) Copyright (20-year remaining life) Notes payable (due in 8 years) Book Value $ 63,000 355,000 137,000 (155,000) Fair Value $ 297,000 311,000 217,000 (141,400) 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, 2021, for both companies. Revenues Coat of goods sold Depreciation expense Amortization expense Interest expense Equity in income of Sierra Net income Retained earnings, 1/1/21 Net income Dividends declared Retained earnings. 12/31/21 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) Padre ${1,427,540) 752,000 292,00 0 43,500 (174.960 $(515,000) $(1,362,500) (515,000) 260,000 $(1,617,500) $ 941,460 877,040 308,000 924,000 Sierra $ (657,900) 413,000 11,500 6,850 6.550 0 $(220,000) $ (499,000) (220,000) 65,000 $ (654,000) $ 650, 350 0 63,000 343,500 130,150 $ 1,187,000 $ (218,000) (155,000) (100,000) (60,000) (654,000) $ 3,050, 500 $ (218,000) (465,000) (300,000) (450.000) (1,617.500)
