Padre, Inc., buys 80 percent of the outstanding common stock of Sierra Corporation on January 1, 2018, for $790,560 cash. At the acquisition date, Sierra’s total fair value, including the non controlling interest, was assessed at $988,200 although Sierra’s book value was only $662,000. 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	$	61,000			$	296,000
Buildings and equipment (10-year remaining life)		284,000				246,000
Copyright (20-year remaining life)		103,000				221,000
Notes payable (due in 8 years)		(184,000	)			(172,800	)

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	$	(1,561,700	)		$	(614,050	)
Cost of goods sold		771,000				440,000
Depreciation expense		310,000				17,800
Amortization expense		0				5,150
Interest expense		48,900				6,100
Equity in income of Sierra		(113,200	)			0
Net income	$	(545,000	)		$	(145,000	)
Retained earnings, 1/1/18	$	(1,447,500	)		$	(502,000	)
Net income		(545,000	)			(145,000	)
Dividends declared		260,000				65,000
Retained earnings, 12/31/18	$	(1,732,500	)		$	(582,000	)
Current assets	$	1,207,740			$	698,950
Investment in Sierra		851,760				0
Land		311,000				61,000
Buildings and equipment (net)		904,000				266,200
Copyright		0				97,850
Total assets	$	3,274,500			$	1,124,000
Accounts payable	$	(283,000	)		$	(198,000	)
Notes payable		(509,000	)			(184,000	)
Common stock		(300,000	)			(100,000	)
Additional paid-in capital		(450,000	)			(60,000	)
Retained earnings (above)		(1,732,500	)			(582,000	)
Total liabilities and equities	$	(3,274,500	)		$	(1,124,000	)

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 Non controlling Interest and Consolidated Totals columns should be entered with a minus sign.)

Answer rating: 100% (QA)

Answer PADRE INC and SIEERA CORPORATION Consolidated worksheet For the year ending December 31 2018 ... View the full answer