Problem 4-37 (LO 4-1, 4-5, 4-6) Padre, Inc., buys 80 percent of the outstanding common stock of Sierra Corporation on January 1, 2015, for $751,680 cash. At the acquisition date, Sierra's total fair value, including the noncontrolling interest, was assessed at $939,600 although Sierra's book value was only $683,000. 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 life) Notes payable (due in 8 years) Book Value Fair Value $ 68,200 $ 268,200 350,000 327,000 105,000 175,000 (205,000) (195400) 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, 2015, for both companies. Revenues Cost of goods sold Depreciation expense Amortization expense Interest expense Equity in income of Sierra Padre Sierra $(1.431,820) S (635,250) 764,000 414,000 293.000 12.600 0 5,250 48,500 6,400 (155,880) 0 Net income $ 482,000) $ (197,000) Retained earings, 1/1/15 Net income (above) Dividends declared $(1.467,500) (482,000) 260,000 $ (523,000) (197.000) 65.000 Retained earnings, 12/31/15 Current assets Investment in Sierra Land Buildings and equipment (net) Copyright $(1,689,500) $ (655,000) 5 1.018,140 $ 585,650 855,360 0 339.000 58.200 956,000 337,400 0 99.750 Total assets $ 3.168,500 $1,191,000 Accounts payable Notes payable Common stock Additional paid-in capital Retained earings (above) $ 204,000) (525,000) (300,000) (450,000) (1.689.500) $ (171,000) (205.000) (100,000) 160,000) 655.000) Total liabilities and equities $13,168,500) $1,191,000) At year-end, there were no intra-entity receivables or payables. Using the acquisition method, prepare the worksheet to consolidate these two companies. PADRE INC. AND SIERRA CORPORATION Consolidated Worksheet For Yoar Ending December 31, 2015 Consolidation Entries Credit Accounts Padre Sierra Debit Noncontrolling Interest Consolidated Totals (1,431,820) 764,000 293,000 0 (635,250) 414,000 12,600 5.250 6,400 0 (197,000) 48,500 (155,680) (482,000) 0 Revenues Cost of goods sold Depreciation expense Amortization expense Interest expense Equity in income of Sierra Separate company net income Consolidated net income NCI in consolidated net income Controlling interest in CNI Retained earnings 1/1 Net income (above) 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 (1,467,500) (482,000) 260.000 (1.689,500) 1.018.140 855,360 339.000 956,000 (523.000) (197,000) 65,000 (655,000) 685.650 0 68,200 337,400 99,750 1,191,000 (171,000) (205,000) 3,168,500 (204,000) (525,000) Common stock Additional paid in capital Retained earnings 12/31 (above) Total liabilities and stockholders' equity (300.000) (450,000) (1,689,500) 3,168,500 (100,000) (60,000) (655.000) 1.191.000 0 0
