Prepare the worksheet to consolidate these two companies

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Reference no: EM132218275

Question - Padre, Inc., buys 80 percent of the outstanding common stock of Sierra Corporation on January 1, 2018, for $771,840 cash. At the acquisition date, Sierra's total fair value, including the non-controlling interest, was assessed at $964,800 although Sierra's book value was only $609,000. Also, several individual items on Sierra's financial records had fair values that differed from their book values as follows:

	Book Value	Fair Value
Land	$68,400	$300,400
Buildings and equipment (10-year remaining life)	322,000	293,000
Copyright (20-year remaining life)	125,000	263,000
Notes payable (due in 8 years)	(182,000)	(167,200)

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.

	Padre	Sierra
Revenues	$(1,490,980)	$(645,950)
Cost of goods sold	766,000	443,000
Depreciation expense	325,000	18,500
Amortization expense	0	6,250
Interest expense	49,700	5,200
Equity in income of Sierra	(133,720)	0
Net income	$(484,000)	$(173,000)
Retained earnings, 1/1/18	$(1,390,000)	$(449,000)
Net income	(484,000)	(173,000)
Dividends declared	260,000	65,000
Retained earnings, 12/31/18	$(1,614,000)	$(557,000)
Current assets	$989,440	$600,350
Investment in Sierra	853,560	0
Land	345,000	68,400
Buildings and equipment (net)	969,000	303,500
Copyright	0	118,750
Total assets	$3,157,000	$1,091,000
Accounts payable	$(276,000)	$(192,000)
Notes payable	(517,000)	(182,000)
Common stock	(300,000)	(100,000)
Additional paid-in capital	(450,000)	(60,000)
Retained earnings (above)	(1,614,000)	(557,000)
Total liabilities and equities	$(3,157,000)	$(1,091,000)

At year-end, there were no intra-entity receivables or payables.

Using the acquisition method, prepare the worksheet to consolidate these two companies.

Reference no: EM132218275

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len2218275

1/18/2019 1:08:05 AM

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 Non-controlling Interest and Consolidated Totals columns should be entered with a minus sign.

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