Question

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 noncontrolling 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 Noncontrolling Interest and Consolidated Totals columns should be entered with a minus sign.)

Answer 1

PADRE INC. and SIEERA CORPORATION Consolidated worksheet For the year ending December 31, 2018
			Consolidated entries
	Padre	Sierra	Debit	Credit	Noncontrolling interest	Consolidated totals
revenues	(1561700)	(614050)				(2175750)
cost of goods sold	771000	440000				1211000
depreciation expense	310000	17800		3800		324000
amortization expense	0	5150	5900			11050
interest expense	48900	6100	1400			56400
equity income in sierra	(113200)	0	113200			0
sepreate company net income	(545000)	(145000)
consolidated net income						(573300)
NI to noncontrolling interest					(28300)	28300
NI to Padre company						(545000)
retained earnings 1/1	(1447500)	(502000)	502000			(1447500)
net income	(545000)	(145000)				(545000)
dividends declared	260000	65000		52000	13000	260000
retained earnings 12/31	(1732500)	(582000)				(1732500)
current assets	1207740	698950				1906690
investment in sierra	851760		52000	903760		0
land	311000	61000	235000			607000
builiding and equipment	904000	266200	3800	38000		1136000
copyright	0	97850	118000	5900		209950
total assets	3274500	1124000				3859640
accounts payable	(283000)	(198000)				(481000)
notes payable	(509000)	(184000)	11200	1400		(683200)
NCI in sierra 1/1				197640	(197640)
NCI in sierra 12/31					(212940)	(212940)
common stock	(300000)	(100000)	100000			(300000)
additional paid in capital	(450000)	(60000)	60000			(450000)
retained earnings 12/31	(1732500)	(582000)				(1732500)
total liab. And stockholders' equity	(3274500)	(1124000)	1202500	1202500		(3859640)

(246000-284000)/10 =-3800

(221000-103000)/20 =5900

(184000-172800)/8 = 1400

65000*20% =13000

65000*80% = 52000

296000-61000 = 235000

284000-246000=-38000

221000-103000=118000

184000-172800= 11200