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.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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.

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