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) Assets Cash and receivables Inventory Equity method investments Land Buildings and equipment, net Total assets Liabilities and shareholders' equity Current liabilitiess Long-term debt Common stock, par value Additional paid-in capital Retained earnings Paxon Saxon $2,860 $720 1,700 900 300 650 175 2,400 600 $7,610 $2,695 $1,500 $1,000 2,000 845 500 50 1,200 2,410 200 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 Estimated fair value $500 400 Land Buildings and equipment, net 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 Equity method investments (400) ▼ 100 ✔ Land Buildings and equipment, net 500 ✔ Identifiable intangibles 875 ✔ Fair value of identifiable net assets 1,350 x Gain on acquisition $ Paxon's acquisition entry (in millions): Description Investment in Saxon Cash Gain on acquisition General Journal Debit Credit 1,350 x 0 ŵ 500 x 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 (in millions) Paxon Dr (Cr) Saxon Dr (Cr) Debit Credit Consolidated Balances Dr (Cr) Cash and receivables 1,160 $ 720✓ $ 1,880 Inventory 1,700 900 ▼ 400 (R) 2,200 ✔ Equity investments Identifiable intangible assets Investment in Saxon 300 (R) 100 ✔ (R) 875✔ 400 ✓ 875- 2,200 x 850 x (E) 1,350 x (R) Land 650 ✔ 175 (R) 275 ✔ 1,100 Buildings and equipment, net 2,400 ✔ 600 (R) 500 ✔ Current liabilities (1,500) ▼ (1,000) ▼ Long-term debt (2,000) ▼ (845) Common stock, par value (500) ▼ (50) (E) 50✔ Additional paid-in capital Retained earnings (1,200) ▼ (2,910) x (200) (E) (600) (E) 200- 600 - Noncontrolling interest (R) 0 x 0x (E) Total 2,600 $ 2,600 ✔ $ 3,500 ✔ (2,500) (2,845) (500) (1,200) (2,910) x 0 x D✓ c. Present the consolidated balance sheet, in good form, at the date of acquisition. • Do not use negative signs for any of your answers. • Enter answers in millions. Consolidated Balance Sheet January 1, 2022 (in millions) Assets Cash and receivables Inventory Current assets Equity method investments Land Buildings and equipment, net $ 1,880 ✔ 2,200 4,080✔ 400 ✔ 1,100 ✓ 3,500✔ Identifiable intangible assets 875✔ Total assets $ 9,955 ✔ Liabilities and shareholders' equity Current liabilities $ 2,500 ✔ Long-term debt 2,845 Total liabilities 5,345✔ Shareholders' equity Paxon stockholders' equity: Common stock 500- Additional paid-in capital 1,200✓ Retained earnings 2,910 x Total Paxon shareholders' equity 4,610 x Noncontrolling interest 0 x Total shareholders' equity 4,610 ✔ Total liabilities and shareholders' equity $ 9,955 ✔

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) Assets Cash and receivables Inventory Equity method investments Land Buildings and equipment, net Total assets Liabilities and shareholders' equity Current liabilitiess Long-term debt Common stock, par value Additional paid-in capital Retained earnings Paxon Saxon $2,860 $720 1,700 900 300 650 175 2,400 600 $7,610 $2,695 $1,500 $1,000 2,000 845 500 50 1,200 2,410 200 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 Estimated fair value $500 400 Land Buildings and equipment, net 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 Equity method investments (400) ▼ 100 ✔ Land Buildings and equipment, net 500 ✔ Identifiable intangibles 875 ✔ Fair value of identifiable net assets 1,350 x Gain on acquisition $ Paxon's acquisition entry (in millions): Description Investment in Saxon Cash Gain on acquisition General Journal Debit Credit 1,350 x 0 ŵ 500 x 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 (in millions) Paxon Dr (Cr) Saxon Dr (Cr) Debit Credit Consolidated Balances Dr (Cr) Cash and receivables 1,160 $ 720✓ $ 1,880 Inventory 1,700 900 ▼ 400 (R) 2,200 ✔ Equity investments Identifiable intangible assets Investment in Saxon 300 (R) 100 ✔ (R) 875✔ 400 ✓ 875- 2,200 x 850 x (E) 1,350 x (R) Land 650 ✔ 175 (R) 275 ✔ 1,100 Buildings and equipment, net 2,400 ✔ 600 (R) 500 ✔ Current liabilities (1,500) ▼ (1,000) ▼ Long-term debt (2,000) ▼ (845) Common stock, par value (500) ▼ (50) (E) 50✔ Additional paid-in capital Retained earnings (1,200) ▼ (2,910) x (200) (E) (600) (E) 200- 600 - Noncontrolling interest (R) 0 x 0x (E) Total 2,600 $ 2,600 ✔ $ 3,500 ✔ (2,500) (2,845) (500) (1,200) (2,910) x 0 x D✓ c. Present the consolidated balance sheet, in good form, at the date of acquisition. • Do not use negative signs for any of your answers. • Enter answers in millions. Consolidated Balance Sheet January 1, 2022 (in millions) Assets Cash and receivables Inventory Current assets Equity method investments Land Buildings and equipment, net $ 1,880 ✔ 2,200 4,080✔ 400 ✔ 1,100 ✓ 3,500✔ Identifiable intangible assets 875✔ Total assets $ 9,955 ✔ Liabilities and shareholders' equity Current liabilities $ 2,500 ✔ Long-term debt 2,845 Total liabilities 5,345✔ Shareholders' equity Paxon stockholders' equity: Common stock 500- Additional paid-in capital 1,200✓ Retained earnings 2,910 x Total Paxon shareholders' equity 4,610 x Noncontrolling interest 0 x Total shareholders' equity 4,610 ✔ Total liabilities and shareholders' equity $ 9,955 ✔

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

See similar textbooks