Problem 2 Pullman, Inc acquired a controlling interest in Sierra Company on 1 1 20x1 At that time, the book value of Sierra Companys net assets was $16,970,000, including the following Fair Value Book Value Remaining Life Buildings $2,700,000 $3,400,000 7 years Equipment 3,700,000 3,300,000 5 years Land 1,700,000 2,550,000 indefinite In acquiring their controlling interest, Pullman paid $10,450,000 cash in exchange for 55 of the outstanding voting common stock of Sierra At the time of the acquisition, the fair value of 100 of Sierras outstanding common stock was $19,000,000 Pullman did not pay a control premium to acquire their 55 controlling interest Any consideration paid in excess of the fair value of net assets acquired is assigned to goodwill The account balances for Pullman, Inc and Sierra Company at 12 31 20x1 are as follows Pullman, Inc Sierra Company Revenues (298,000,000) (103,750,000) Expenses 271,000,000 95,800,000 Equity in income of Sierra Company (4,361,500) 0 Net income (31,361,500) (7,950,000) Retained earnings, January 1, 20x1 (2,500,000) (100,000) Net income (above) (31,361,500) (7,950,000) Dividends paid 5,000,000 3,000,000 Retained earnings, December 31, 20x1 (28,861,500) (5,050,000) Current Assets 30,500,000 20,800,000 Investment in Sierra Company 13,161,500 Land 1,500,000 1,700,000 Buildings 5,600,000 2,360,000 Equipment (net) 3,100,000 2,960,000 Total assets 53,861,500 27,820,000 Accounts payable (3,100,000) (4,900,000) Notes payable (1,000,000) Common stock (2,900,000) (6,000,000) Additional paid in capital (19,000,000) (10,870,000) Retained earnings, Dec 31, 20x1 (above) (28,861,500) (5,050,000) Total liabilities and stockholders equity (53,861,500) (27,820,000) (Continued on the next page) Required Prepare the journal entry to record Pullmans acquisition of Sierra Company Prepare a schedule showing the determination of goodwill, if applicable, for this acquisition Prepare a schedule showing the allocation of any related purchase price adjustments to the acquired companys assets, including the related annual amortizations, if applicable For 12 31 20x1, prepare a consolidation worksheet for this transaction Assume that no goodwill impairment adjustment is required (For the format, consider the Exhibit 4 6 on page 167 use Excel)

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Problem 2 Pullman, Inc. acquired a controlling interest in Sierra Company on 1/1/20x1. At that time, the book value of Sierra Companys net assets was

Problem 2

Pullman, Inc. acquired a controlling interest in Sierra Company on 1/1/20x1. At that time, the book value of Sierra Companys net assets was $16,970,000, including the following:

	Fair Value	Book Value	Remaining Life
Buildings	$2,700,000	$3,400,000	7 years
Equipment	3,700,000	3,300,000	5 years
Land	1,700,000	2,550,000	indefinite

In acquiring their controlling interest, Pullman paid $10,450,000 cash in exchange for 55% of the outstanding voting common stock of Sierra. At the time of the acquisition, the fair value of 100% of Sierras outstanding common stock was $19,000,000. Pullman did not pay a control premium to acquire their 55% controlling interest.

Any consideration paid in excess of the fair value of net assets acquired is assigned to goodwill.

The account balances for Pullman, Inc. and Sierra Company at 12/31/20x1 are as follows:

	Pullman, Inc.	Sierra Company
Revenues	(298,000,000)	(103,750,000)
Expenses	271,000,000	95,800,000
Equity in income of Sierra Company	(4,361,500)	0
Net income	(31,361,500)	(7,950,000)

Retained earnings, January 1, 20x1	(2,500,000)	(100,000)
Net income (above)	(31,361,500)	(7,950,000)
Dividends paid	5,000,000	3,000,000
Retained earnings, December 31, 20x1	(28,861,500)	(5,050,000)

Current Assets	30,500,000	20,800,000
Investment in Sierra Company	13,161,500
Land	1,500,000	1,700,000
Buildings	5,600,000	2,360,000
Equipment (net)	3,100,000	2,960,000
Total assets	53,861,500	27,820,000

Accounts payable	(3,100,000)	(4,900,000)
Notes payable		(1,000,000)
Common stock	(2,900,000)	(6,000,000)
Additional paid-in capital	(19,000,000)	(10,870,000)
Retained earnings, Dec. 31, 20x1 (above)	(28,861,500)	(5,050,000)
Total liabilities and stockholders equity	(53,861,500)	(27,820,000)

(Continued on the next page)

Required

Prepare the journal entry to record Pullmans acquisition of Sierra Company.
Prepare a schedule showing the determination of goodwill, if applicable, for this acquisition.
Prepare a schedule showing the allocation of any related purchase price adjustments to the acquired companys assets, including the related annual amortizations, if applicable.
For 12/31/20x1, prepare a consolidation worksheet for this transaction. Assume that no goodwill impairment adjustment is required. (For the format, consider the Exhibit 4.6 on page 167 & use Excel)