Padre, Inc., buys 80 percent of the outstanding common stock of Sierra Corporati
ID: 2338488 • Letter: P
Question
Padre, Inc., buys 80 percent of the outstanding common stock of Sierra Corporation on January 1, 2018, for $754,080 cash. At the acquisition date, Sierra’s total fair value, including the noncontrolling interest, was assessed at $942,600 although Sierra’s book value was only $659,000. Also, several individual items on Sierra’s financial records had fair values that differed from their book values as follows:
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.
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.)
Book Value Fair Value Land $ 63,000 $ 297,000 Buildings and equipment (10-year remaining life) 355,000 311,000 Copyright (20-year remaining life) 137,000 217,000 Notes payable (due in 8 years) (155,000 ) (141,400 )Explanation / Answer
ANSWER:
Here we have to preapre the worksheet for consolidation by using acquistion method,
Accounts Padre($) Sierra($) Debit($) Credit($) Non controlling interest($) Consolidated totals($) Revenues 1427540 657900 2085440 Cost of goods sold 752000 413000 1165000 Depreciation expense 292000 11500 4400 299100 Amortization expense 6850 4000 10850 Interest expense 43500 6550 1700 51750 Equity in income of sierra 174960 174960 0 Seperate company net income 315000 220000 Consolidated net income 558740 NI to non controlling interest 43740 43740 NI to controlling interest 515000 Retained earnings 1/1 1362500 499000 499000 1362500 Net income 515000 220000 515000 Divideneds declared 260000 65000 52000 13000 260000 Retained earnings 12/31 1617500 654000 1617500 Current assests 941460 650350 1591810 Investment in sierra 877040 52000 552000 174960 250720 0 Land 308000 63000 245000 616000 Buildings and equipment 924000 343500 4400 4400 1227900 Copy rights 130150 80000 4000 206150 Total assests 3050500 1187000 2050050 Accounts payable 218000 218000 436000 Notes payable 465000 155000 13600 1700 608100 NCI in sierra 1/1 138000 NCI in sierra 12/31 57340 197040 227780 227780 Common stock 300000 100000 100000 300000 Additional paid in capital 450000 60000 60000 450000 Retained earnings 12/31 1617500 654000 1617500 Total liabilities an equaties 3050500 1187000 1265920 1265920 2050050Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.