Prepare the worksheet to consolidate the given companies

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Reference no: EM132214550

Question: Padre, Inc., buys 80 percent of the outstanding common stock of Sierra Corporation on January 1, 2018, for $786,720 cash. At the acquisition date, Sierra's total fair value, including the noncontrolling interest, was assessed at $983,400 although Sierra's book value was only $648,000. 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 $ 66,900 $ 329,900 Buildings and equipment (10-year remaining life) 276,000 248,000 Copyright (20-year remaining life) 199,000 285,000 Notes payable (due in 8 years) (175,000) (160,600) 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 $ (1,487,240) $ (604,800) Cost of goods sold 744,000 416,000 Depreciation expense 265,000 18,000 Amortization expense 0 9,950 Interest expense 45,000 7,850 Equity in income of Sierra (119,760) 0 Net income $ (553,000) $ (153,000) Retained earnings, 1/1/18 $ (1,350,000) $ (488,000) Net income (553,000) (153,000) Dividends declared 260,000 65,000 Retained earnings, 12/31/18 $ (1,643,000) $ (576,000) Current assets $ 939,520 $ 632,050 Investment in Sierra 854,480 0 Land 366,000 66,900 Buildings and equipment (net) 960,000 258,000 Copyright 0 189,050 Total assets $ 3,120,000 $ 1,146,000 Accounts payable $ (237,000) $ (235,000) Notes payable (490,000) (175,000) Common stock (300,000) (100,000) Additional paid-in capital (450,000) (60,000) Retained earnings (above) (1,643,000) (576,000) Total liabilities and equities $ (3,120,000) $ (1,146,000)

At year-end, there were no intra-entity receivables or payables. Using the acquisition method, prepare the worksheet to consolidate these two companies. (For accounts where multiple consolidation entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet. Amounts in the Debit and Credit columns should be entered as positive. Negative amounts for the Noncontrolling Interest and Consolidated Totals columns should be entered with a minus sign.)

Reference no: EM132214550

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