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

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

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Padre, Incorporated, buys 80 percent of the outstanding common stock of Sierra Corporation on January 1, 2024, for $757,280 cash. At the acquisition date, Sierra's total fair value, including the noncontrolling interest, was assessed at $946,600, although Sierra's book value was only $696,000. Also, several individual items on Sierra's financial records had fair values that differed from their book values as follows: Land Buildings and equipment (10-year remaining life) Copyright (20-year remaining life) Notes payable (due in 8 years) Revenues Cost of goods sold Depreciation expense Amortization expense Account For internal reporting purposes, Padre, Incorporated, employs the equity method to account for this investment. The following account balances are for the year ending December 31, 2024, for both companies. Current assets Investment in Sierra Interest expense Equity in income of Sierra Net income Retained earnings, 1/1/24 Net income Dividends declared Retained earnings, 12/31/24 Account Accounts payable Notes payable Common stock Land Buildings and equipment (net) Copyright Total assets Book Value $ 66,300 294,000 192,000 (177,000) Additional paid-in capital Retained earnings (above) Total liabilities and equities Fair Value $ 251,300 240,000 300,000 (165,400) At year-end, there were no intra-entity receivables or payables. Padre $ (1,447,260) 755,000 340,000 0 44,700 (152,440) $ (460,000) $ (1,382,500) (460,000) 260,000 $ (1,582,500) $ 913,780 857,720 350,000 870,000 0 $ 2,991,500 $ (192,000) (467,000) (300,000) (450,000) (1,582,500) $ (2,991,500) Required: Prepare a worksheet to consolidate the financial statements of these two companies. Sierra $ (649,500) 423,000 18,400 9,600 6,500 0 $ (192,000) $ (536,000) (192,000) 65,000 $ (663,000) $ 671,700 0 66,300 275,600 182,400 $ 1,196,000 $ (196,000) (177,000) (100,000) (60,000) (663,000) $ (1,196,000)
Transcribed Image Text:Padre, Incorporated, buys 80 percent of the outstanding common stock of Sierra Corporation on January 1, 2024, for $757,280 cash. At the acquisition date, Sierra's total fair value, including the noncontrolling interest, was assessed at $946,600, although Sierra's book value was only $696,000. Also, several individual items on Sierra's financial records had fair values that differed from their book values as follows: Land Buildings and equipment (10-year remaining life) Copyright (20-year remaining life) Notes payable (due in 8 years) Revenues Cost of goods sold Depreciation expense Amortization expense Account For internal reporting purposes, Padre, Incorporated, employs the equity method to account for this investment. The following account balances are for the year ending December 31, 2024, for both companies. Current assets Investment in Sierra Interest expense Equity in income of Sierra Net income Retained earnings, 1/1/24 Net income Dividends declared Retained earnings, 12/31/24 Account Accounts payable Notes payable Common stock Land Buildings and equipment (net) Copyright Total assets Book Value $ 66,300 294,000 192,000 (177,000) Additional paid-in capital Retained earnings (above) Total liabilities and equities Fair Value $ 251,300 240,000 300,000 (165,400) At year-end, there were no intra-entity receivables or payables. Padre $ (1,447,260) 755,000 340,000 0 44,700 (152,440) $ (460,000) $ (1,382,500) (460,000) 260,000 $ (1,582,500) $ 913,780 857,720 350,000 870,000 0 $ 2,991,500 $ (192,000) (467,000) (300,000) (450,000) (1,582,500) $ (2,991,500) Required: Prepare a worksheet to consolidate the financial statements of these two companies. Sierra $ (649,500) 423,000 18,400 9,600 6,500 0 $ (192,000) $ (536,000) (192,000) 65,000 $ (663,000) $ 671,700 0 66,300 275,600 182,400 $ 1,196,000 $ (196,000) (177,000) (100,000) (60,000) (663,000) $ (1,196,000)
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