Reference no: EM13914298

Padre, Inc., buys 80 percent of the outstanding common stock of Sierra Corporation on January 1, 2015, for $802,720 cash. At the acquisition date, Sierra's total fair value, including the non controlling interest, was assessed at $1,003,400 although Sierra's book value was only $690,000. 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 $ 65,000 $ 290,000 Buildings and equipment (10-year remaining life) 287,000 263,000 Copyright (20-year life) 122,000 216,000 Notes payable (due in 8 years) (176,000 ) (157,600 ) 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. Padre Sierra Revenues $ (1,394,980 ) $ (684,900 ) Cost of goods sold 774,000 432,000 Depreciation expense 274,000 11,600 Amortization expense 0 6,100 Interest expense 52,100 9,200 Equity in income of Sierra (177,120 ) 0 Net income $ (472,000 ) $ (226,000 ) Retained earnings, 1/1/15 $ (1,275,000 ) $ (530,000 ) Net income (above) (472,000 ) (226,000 ) Dividends declared 260,000 65,000 Retained earnings, 12/31/15 $ (1,487,000 ) $ (691,000 ) Current assets $ 856,160 $ 764,700 Investment in Sierra 927,840 0 Land 360,000 65,000 Buildings and equipment (net) 909,000 275,400 Copyright 0 115,900 Total assets $ 3,053,000 $ 1,221,000 Accounts payable $ (275,000 ) $ (194,000 ) Notes payable (541,000 ) (176,000 ) Common stock (300,000 ) (100,000 ) Additional paid-in capital (450,000 ) (60,000 ) Retained earnings (above) (1,487,000 ) (691,000 ) Total liabilities and equities $ (3,053,000 ) $ (1,221,000 ) At year-end, there were no intra-entity receivables or payables. Using the acquisition method, prepare the worksheet to consolidate these two companies. (Enter credits as negative amounts.)