Problem 4-40 (Algo) (LO 4-1, 4-5, 4-6) Padre, Inc., buys 80 percent of the outstanding common stock of Sierra Corporation on January 1, 2021, for $737,280 cash. At the acquisition date, Sierra's total fair value, including the noncontrolling interest, was assessed at $921,600 although Sierra's book value was only $680,000. 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 $ 60,100 352,000 147,000 (151, 000) Fair Value $ 228, 100 302,000 253,000 (133,400) 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. Padre $(1,635,200) 795,000 358,000 Sierra $ (663,800) 479,000 13,300 7,350 8,150 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 49,000 (122,800) $ (556,000) $(1,392,500) (556,000) 260,000 $(1,688,500) $ 1,081, 420 808, 080 385,000 911,000 $ (156,000) (520,000) (156,000) 65,000 $ (611,000) $ 570,550 0 60,100 338,700 139,650 $ 1,109,000 $ (187,000) (151,000) (100,000) (60,000 (611,000) $(1,109,000) $ 3,185,500 $ (227,000) (520,000) (300,000) (450,000) (1,688,500) $(3,185,500) At year-end, there were no intra-entity receivables or payables. Prepare a worksheet to consolidate the financial statements of 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. Input all amounts as positive values.) PADRE INC., AND SIERRA CORPORATION Consolidated Worksheet For Year Ending December 31, 2021 Consolidation Entries Accounts Padre Sierra Debit Credit Noncontrolling Interest Consolidated Totals Revenues 358,000 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 $(1,635,200) $ (663,800) 795,000 479,000 13,300 0 7,350 49,000 8,150 (122,800) 0 $ (556,000) $ (156,000) 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 $ (1,392,500) $ (520,000) (556,000) (156,000) 260,000 65,000 $(1,688,500) $ (611,000) $ 1,081,420 $ 570,550 808,080 0 385.000 60,100 911,000 338,700 0 139,650 $ 3,185,500 $ 1,109,000 $ (227,000) $ (187,000) (520,000) (151,000) (300,000) (450,000) (1,688,500) $ (3,185,500) (100,000) (60,000) (611,000) $ (1,109,000)
