On January $1,2022,$ Paxon Corporation acquired all of the outstanding common stock of Saxon Company for $$2$ billion cash. The balance sheets of Paxon and Saxon, immediately prior to the combination, are shown below:

Balance Sheets $($in millions$)$ Paxon Saxon

Assets

Cash and receivables $$2,860$ $$720$

Inventory $1,700900$

Equity method investments $--300$

Land $650175$

Buildings and equipment, net $2,400600$

Total assets $$7,610$ $$2,695$

Liabilities and Shareholders' Equity

Current liabilities $1,5001,000$

Long$-$term debt $2,000845$

Common stock, par value $50050$

Additional paid$-$in capital $1,200200$

Retained earnings $2,410600$

Total liabilities and shareholders$$ equity $$7,610$ $$2,695$

Several of Saxon$$s assets had fair values that were different from their book values. Estimates of the fair values of these items follow:

$($in millions$)$ Estimated Fair Value

Inventory $$500$

Equity method investments $400$

Land $450$

Buildings and equipment, net $1,100$

In addition, Saxon had previously unrecorded identifiable assets valued at $$875$ million.

Required

$($a$)$ Calculate the gain on acquisition in this bargain purchase.

$Answer million

$($b$)$ Prepare a working paper to consolidate the balance sheets of Paxon and Saxon at January $1,2022.$

Remember to use negative signs with your credit balance answers in the Dr $($Cr$)$ columns.

Consolidation Working Paper

Accounts Taken From Books Eliminations

$($in millions$)$

Paxon

Dr $($Cr$)$

Saxon

Dr $($Cr$)$

Debit

Credit Consolidated

Balances

Dr $($Cr$)$

Cash and receivables Answer Answer Answer

Inventory Answer Answer Answer $($R$)$ Answer

Equity method investments $--$ Answer $($R$)$ Answer Answer

Investment in Saxon Answer Answer $($E$)--$

Answer $($R$)$

Land Answer Answer $($R$)$ Answer Answer

Buildings and equipment, net Answer Answer $($R$)$ Answer Answer

Identifiable intangibles $----($R$)$ Answer Answer

Current liabilities Answer Answer Answer

Long$-$term debt Answer Answer Answer

Common stock, par value Answer Answer $($E$)$ Answer Answer

Additional paid$-$in capital Answer Answer $($E$)$ Answer Answer

Retained earnings Answer Answer $($E$)$ Answer Answer

Total Answer Answer Answer Answer Answer

$($c$)$ Present the consolidated balance sheet, in good form, at the date of acquisition.

Paxon Corporation and Subsidiary

Consolidated Balance Sheet

Date of Acquisition

$($in millions$)$

Assets Liabilities

Cash and receivables Answer Current liabilities Answer

Inventory Answer Long$-$term debt Answer

Long$-$term investments Answer Total liabilities Answer

Land Answer

Buildings and equipment, net Answer Shareholders$$ equity

Identifiable intangibles Answer Common stock, par value Answer

Additional paid$-$in capital Answer

Retained earnings Answer

Total equity Answer

Total assets Answer Total liabilities and equity Answer