Padre, Inc., buys 80 percent of the outstanding common stock of Sierra Corporation on January 1, 2018, for $802,720 cash. At the acquisition date, Sierra’s total fair value, including the noncontrolling 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 remaining 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, 2018, 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, 1/1/18 $(1,275,000) $ (530,000) Net income (472,000) (226,000) Dividends declared 260,000 65,000 Retained earnings, 12/31/18 $(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. Prepare a worksheet to consolidate the financial statements of these two companies.

Padre, Inc., buys 80 percent of the outstanding common stock of Sierra Corporation on January 1, 2018, for $802,720 cash. At the acquisition date, Sierra’s total fair value, including the noncontrolling 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 remaining 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, 2018, 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, 1/1/18 $(1,275,000) $ (530,000) Net income (472,000) (226,000) Dividends declared 260,000 65,000 Retained earnings, 12/31/18 $(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. Prepare a worksheet to consolidate the financial statements of these two companies.

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

Chapter12: Intangibles

Section: Chapter Questions

Problem 18E

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	Book Value	Fair Value
Land	$ 65,000	$ 290,000
Buildings and equipment (10-year remaining life)	287,000	263,000
Copyright (20-year remaining 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, 2018, 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, 1/1/18	$(1,275,000)	$ (530,000)
Net income	(472,000)	(226,000)
Dividends declared	260,000	65,000
Retained earnings, 12/31/18	$(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.

Prepare a worksheet to consolidate the financial statements of these two companies.

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