Consolidated Balance Sheet Working Paper, Date of Acquisition, Bargain Purchase On January 1, 2022, Paxon Corporation acquired 80 percent of the outstanding common stock of the Saxon Company for $1.7 billion cash. The balance sheets of Paxon and Saxon, immediately prior to the combination, follow: (in millions) Paxon Saxon Assets Cash and receivables Inventory Equity method investments Land Buildings and equipment, net Total assets Liabilities and shareholders' equity Current liabilitiess $2,860 $720 1,700 900 - 300 650 175 2,400 600 $7,610 $2,695 Long-term debt Common stock, par value Additional paid-in capital Retained earnings $1,500 $1,000 2,000 845 500 50 1,200 200 2,410 600 Total liabilities and shareholders' equity $7,610 $2,695 Several of Saxon's assets and liabilities had fair values that were different from their book values. Estimates of the fair values of these items follow: (in millions) Inventory Equity method investments Land Buildings and equipment, net Estimated fair value $500 400 450 1,100 In addition, Saxon had previously unrecorded identifiable intangible assets valued at $875 million. The estimated fair value of the noncontrolling interest in Saxon is $350 million. a. Calculate the gain on acquisition and prepare Paxon's entry to record the acquisition. When appropriate, use negative signs with your revaluation answers (left column only). • Do not use negative signs with your answers in the right column. • Enter answers in millions. Acquisition cost Fair value of noncontrolling interest Total Book value of Saxon Revaluations: $ 1,700 350 $ 2,050 $ 850 Inventory (400) Equity method investments 100 Land 275 Buildings and equipment, net 500 Identifiable intangibles 875 Fair value of identifiable net assets Gain on acquisition Paxon's acquisition entry (in millions): 2,200 $ 150 General Journal Description Debit Credit Investment in Saxon 1,850 Cash 1,700 Gain on acquisition 0 150 b. Prepare a working paper to consolidate the balance sheets of Paxon and Saxon at January 1, 2022. b. Prepare a working paper to consolidate the balance sheets of Paxon and Saxon at January 1, 2022. Remember to use negative signs with your credit (Cr) balance answers in the Dr (Cr) columns. Enter answers in millions. Consolidation Working Paper Accounts Taken From Books Eliminations Consolidated Paxon Saxon Balances (in millions) Dr (Cr) Dr (Cr) Debit Credit Dr (Cr) Cash and receivables $ 1,160 $ 720 $ 1,880 Inventory 1,700 900 400 (R) 2,200 Equity investments 300 (R) 100 400 Identifiable intangible assets - (R) 875 875 Investment in Saxon 150 150 (E) 1,700 (R) Land 650 175 (R) 275 1,100 Buildings and equipment, net 2,400 600 (R) 500 3,500 Current liabilities (1,500) (1,000) (2,500) Long-term debt (2,000) (845) (2,845) Common stock, par value (500) (50) (E) 50 (500) Additional paid-in capital (1,200) (200) (E) 200 (1,200) Retained earnings (2,410) (600) (E) 600 (2,410) Noncontrolling interest (R) (850) 350 (E) Total $ 0 $ 0 $ 2,600 $ 2,600 $ (500) 0

Consolidated Balance Sheet Working Paper, Date of Acquisition, Bargain Purchase On January 1, 2022, Paxon Corporation acquired 80 percent of the outstanding common stock of the Saxon Company for $1.7 billion cash. The balance sheets of Paxon and Saxon, immediately prior to the combination, follow: (in millions) Paxon Saxon Assets Cash and receivables Inventory Equity method investments Land Buildings and equipment, net Total assets Liabilities and shareholders' equity Current liabilitiess $2,860 $720 1,700 900 - 300 650 175 2,400 600 $7,610 $2,695 Long-term debt Common stock, par value Additional paid-in capital Retained earnings $1,500 $1,000 2,000 845 500 50 1,200 200 2,410 600 Total liabilities and shareholders' equity $7,610 $2,695 Several of Saxon's assets and liabilities had fair values that were different from their book values. Estimates of the fair values of these items follow: (in millions) Inventory Equity method investments Land Buildings and equipment, net Estimated fair value $500 400 450 1,100 In addition, Saxon had previously unrecorded identifiable intangible assets valued at $875 million. The estimated fair value of the noncontrolling interest in Saxon is $350 million. a. Calculate the gain on acquisition and prepare Paxon's entry to record the acquisition. When appropriate, use negative signs with your revaluation answers (left column only). • Do not use negative signs with your answers in the right column. • Enter answers in millions. Acquisition cost Fair value of noncontrolling interest Total Book value of Saxon Revaluations: $ 1,700 350 $ 2,050 $ 850 Inventory (400) Equity method investments 100 Land 275 Buildings and equipment, net 500 Identifiable intangibles 875 Fair value of identifiable net assets Gain on acquisition Paxon's acquisition entry (in millions): 2,200 $ 150 General Journal Description Debit Credit Investment in Saxon 1,850 Cash 1,700 Gain on acquisition 0 150 b. Prepare a working paper to consolidate the balance sheets of Paxon and Saxon at January 1, 2022. b. Prepare a working paper to consolidate the balance sheets of Paxon and Saxon at January 1, 2022. Remember to use negative signs with your credit (Cr) balance answers in the Dr (Cr) columns. Enter answers in millions. Consolidation Working Paper Accounts Taken From Books Eliminations Consolidated Paxon Saxon Balances (in millions) Dr (Cr) Dr (Cr) Debit Credit Dr (Cr) Cash and receivables $ 1,160 $ 720 $ 1,880 Inventory 1,700 900 400 (R) 2,200 Equity investments 300 (R) 100 400 Identifiable intangible assets - (R) 875 875 Investment in Saxon 150 150 (E) 1,700 (R) Land 650 175 (R) 275 1,100 Buildings and equipment, net 2,400 600 (R) 500 3,500 Current liabilities (1,500) (1,000) (2,500) Long-term debt (2,000) (845) (2,845) Common stock, par value (500) (50) (E) 50 (500) Additional paid-in capital (1,200) (200) (E) 200 (1,200) Retained earnings (2,410) (600) (E) 600 (2,410) Noncontrolling interest (R) (850) 350 (E) Total $ 0 $ 0 $ 2,600 $ 2,600 $ (500) 0

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 19E

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