Padre, Inc., buys 80 percent of the outstanding common stock of Sierra Corporation on January 1, 2018, for $736,800 cash. At the acquisition date, Sierra's total fair value, including the noncontrolling interest, was assessed at $921,000 although Sierra's book value was only $644,000. 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 Fair Value $ 64,900 $ 275,900 298,000 226,000 344,000 134,000 (166,000) (146,000) 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 Sierra Revenues Cost of goods sold Depreciation expense Amortization expense Interest expense Equity in income of Sierra $(1,463,9) (731,300) 466,000 16,800 6,700 8,800 707,000 356,000 46,300 184,400 Net income $(539,000)(233,000) Retained earnings, 1/1/18 Net income Dividends declared 1,282,580)(484,000) (233,000) (539,000) 260,000 65,000 1,561,50e) (652,000) $ 911,300 $697,600 Retained earnings, 12/31/18 Current assets Investment in Sierra Land Buildings and equipment (net) Copyright 869, 20e 314,000 923,000 64,900 327,200 127,300 1,217,000 Total assets $. 3,017,500 Accounts payable Notes payable Common stock Additional paid-in capital Retained earnings (above) $ (223,000) (239,000) (483,000) (300,000) (450,000) (166,000) (100,000) (60,000) 1,561, 580) 652,000) $ (3,017,500 (1, 217,000) Total liabilities and equities 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 Debit Credit Noncontrolling Consolidated Sierra Interest Totals Revenues Cost of goods sold Depreciation expense Amortization expense Interest expense Equity in income of Sierra Separate company net income Consolidated net income $ (1,463,900)$ (731,300) 466,000 16,800 6,700 8,800 707,000 356,000 46,300 (184,400) $ (539,000)$ (233,000) NI to noncontrolling interest NI to Padre Company Retained earnings 1/1 Net income (above) Dividends declared $ (1,282,500)$ (484,000) (539,000)(233,000) 65,000 $ (1,561,500)$ (652,000) 260,000 Retained earnings 12/31 Current assets Investment in Sierra Land Buildings and equipment (net) Copyright $ 911,300 $697,600 869,200 314,000 923,000 64,900 327,200 127,300 $ 3,017,500 $ 1,217,000 $ (223,000)$ (239,000) (483,000) 166,000) 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 (483,000) (300,000) 100,000) (60,000) 1,561,500) (652,000) $ (3,017,500)$(1,217,000) (450,000)
