Padre, Inc., buys 80 percent of the outstanding common stock of Sierra Corporation on January 1, 2021, for $736,800 cash. At the acquisition date, Sierra's total fair value, including the noncontrolling interest, was assessed at $921,000 although Sierra's book value was only $644,000. 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) 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 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. 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 $(1,463,900) $ 707,000 356,000 Book Value $ 64,900 344,000 134,000 (166,000) $(1,282,500) $ (539,000) 260,000 0 46,300 (184,400) $ (539,000) $ (233,000) Sierra (731,300) 466,000 16,800 6,700 8,800 0 (484,000) (233,000) 65,000 $(1,561,500) $ (652,000) $ 697,600 0 64,900 327,200 127,300 911,300 869,200 314,000 923,000 $ 3,017,500 $ 1,217,000 $ (223,000) $ (239,000) (483,000) (166,000) (300,000) (450,000) (1,561,500) $(3,017,500) Fair Value $275,900 298,000 226,000 (146,000) (100,000) (60,000) (652,000) $(1,217,000)
Padre, Inc., buys 80 percent of the outstanding common stock of Sierra Corporation on January 1, 2021, for $736,800 cash. At the acquisition date, Sierra's total fair value, including the noncontrolling interest, was assessed at $921,000 although Sierra's book value was only $644,000. 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) 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 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. 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 $(1,463,900) $ 707,000 356,000 Book Value $ 64,900 344,000 134,000 (166,000) $(1,282,500) $ (539,000) 260,000 0 46,300 (184,400) $ (539,000) $ (233,000) Sierra (731,300) 466,000 16,800 6,700 8,800 0 (484,000) (233,000) 65,000 $(1,561,500) $ (652,000) $ 697,600 0 64,900 327,200 127,300 911,300 869,200 314,000 923,000 $ 3,017,500 $ 1,217,000 $ (223,000) $ (239,000) (483,000) (166,000) (300,000) (450,000) (1,561,500) $(3,017,500) Fair Value $275,900 298,000 226,000 (146,000) (100,000) (60,000) (652,000) $(1,217,000)
Chapter20: Corporations: Distributions In Complete Liquidation And An Overview Of Reorganizations
Section: Chapter Questions
Problem 35P
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Please don't give image format and solve detailed answer
Transcribed Image Text:Padre, Inc., buys 80 percent of the outstanding common stock of Sierra Corporation on January 1, 2021, for $736,800 cash. At the
acquisition date, Sierra's total fair value, including the noncontrolling interest, was assessed at $921,000 although Sierra's book value
was only $644,000. 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)
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
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.
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
Sierra
$(1,463,900) $ (731,300)
707,000
466,000
356,000
16,800
6,700
8,800
0
0
46,300
(184,400)
$ (539,000) $ (233,000)
Book Value
$ 64,900
344,000
134,000
(166,000)
$(1,282,500) $
(539,000)
260,000
$(1,561,500)
$
(484,000)
(233,000)
65,000
$ (652,000)
697,600
911,300 $
869,200
314,000
923,000
0
0
64,900
327,200
127,300
$ 1,217,000
$ 3,017,500
$ (223,000) $ (239,000)
(483,000)
(166,000)
(300,000)
(450,000)
(1,561,500)
$ (3,017,500)
Fair Value
$ 275,900
298,000
226,000
(146,000)
(100,000)
(60,000)
(652,000)
$(1,217,000)
Transcribed Image Text: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.)
Show Transcribed Text
Accounts
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
PADRE INC., AND SIERRA CORPORATION
Consolidated Worksheet
For Year Ending December 31, 2021
Padre
$(1,463,900) $ (731,300)
466,000
16,800
6,700
8,800
0
Sierra
707,000
356,000
0
46,300
(184,400)
$ (539,000) $ (233,000)
$(1,282,500) $ (484,000)
(539,000)
(233,000)
260,000
65,000
$(1,561,500) $ (652,000)
$ 911,300 $ 697,600
869,200
314,000
923,000
0
0
64,900
327,200
127,300
$ 3,017,500 $ 1,217,000
$ (223,000) $ (239,000)
(166,000)
(483,000)
(300,000)
(450,000)
(100,000)
(60,000)
(1,561,500) (652,000)
$ (3,017,500) $(1,217,000)|
Consolidation Entries
Debit
Credit
Noncontrolling
Interest
Consolidated
Totals
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