Padre, Inc., buys 80 percent of the outstanding common stock of Sierra Corporation on January 1, 2021, for $736,960 cash. At the acquisition date, Sierra's total fair value, including the noncontrolling interest, was assessed at $921,200 although Sierra's book value was only $634,000. 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 $ 60,800 301,000 177,000 (229,000) Fair Value $ 237,800 268,000 305,000 (213,800) 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 Cost 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) Total liabilities and equities Padre $(1,476,500) 725,000 352,000 0 47,300 (156,800 $ (509,000) $(1,465,000) (509,000) 260,000 $(1,714,000) $ 1,126,240 841,760 346,000 890,000 0 $ 3, 204,000 $ (247,000) (493, 000) (300,000) (450,000) (1,714,000) $(3,204,000) Sierra $ (660,900) 428,000 14, 200 8,850 8,850 0 $ (201,000) $ (474,000) (201,000) 65,000 $ (610,000) $ 730,250 0 60,800 286,800 168,150 $ 1,246,000 $ (247,000) (229,000) (100,000) (60,000) (610,000) $(1,246,000) PADRE INC., AND SIERRA CORPORATION Consolidated Worksheet For Year Ending December 31, 2021 Consolidation Entries Accounts Padre Sierra Debit Credit Noncontrolling Interest Consolidated Totals $(1.476,500) S (660,900) 725,000 428,000 352,000 14,200 0 8,850 47,300 8.850 (156,800) 0 $ (509,000) S (201,000) 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, 1/1/21 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 NCI in Sierra 1/1 NCI in Sierra 12/31 Common stock Additional paid-in capital Retained earnings (above) Total liabilities and equities $(1.465,000) S (474,000) (509,000) (201.000) 260,000 65.000 $(1,714,000) S (610.000) $ 1,120.240 S 730.250 841,760 0 346.000 60.800 890,000 288.800 0 168,150 $ 3,204,000 S 1,248,000 $ (247.000) (493.000) $ (247,000) (229,000) (300.000) (450,000) (1.714,000) $(3.204,000) (100,000) (60,000) (610,000) S (1.246,000)
