3.4 Consolidated Balance Sheet Working Paper, Bargain Purchase On January 1, 2019, Paxon Corporation acquired all of the outstanding common stock of Saxon Company for $1.7 billion cash. The balance sheets of Paxon and Saxon, immediately prior to the combination, are shown below: Balance Sheets (in millions) Assets Cash and receivables.. Inventory.. Equity method investments. Land.... Buildings and equipment, net Total assets Liabilities and Shareholders' Equity Current liabilities... Long-term debt Common stock, par value Additional paid-in capital Retained earnings Total liabilities and shareholders' equity Paxon (in millions) Inventory... Equity method investments Land... Buildings and equipment, net $2,860 1,700 650 2,400 $7,610 $1,500 2,000 500 1,200 2,410 $7,610 Saxon $ 720 900 300 175 600 $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 addition, Saxon had previously unrecorded identifiable assets valued at $110 million. Required $1,000 400 100 350 845 $2,695 Estimated Fair Value $800 250 420 900 a. Calculate the gain on acquisition in this bargain purchase. b. Prepare a working paper to consolidate the balance sheets of Paxon and Saxon at January 1, 2019. Present the consolidated balance sheet, in good form, at the date of acquisition. C.
3.4 Consolidated Balance Sheet Working Paper, Bargain Purchase On January 1, 2019, Paxon Corporation acquired all of the outstanding common stock of Saxon Company for $1.7 billion cash. The balance sheets of Paxon and Saxon, immediately prior to the combination, are shown below: Balance Sheets (in millions) Assets Cash and receivables.. Inventory.. Equity method investments. Land.... Buildings and equipment, net Total assets Liabilities and Shareholders' Equity Current liabilities... Long-term debt Common stock, par value Additional paid-in capital Retained earnings Total liabilities and shareholders' equity Paxon (in millions) Inventory... Equity method investments Land... Buildings and equipment, net $2,860 1,700 650 2,400 $7,610 $1,500 2,000 500 1,200 2,410 $7,610 Saxon $ 720 900 300 175 600 $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 addition, Saxon had previously unrecorded identifiable assets valued at $110 million. Required $1,000 400 100 350 845 $2,695 Estimated Fair Value $800 250 420 900 a. Calculate the gain on acquisition in this bargain purchase. b. Prepare a working paper to consolidate the balance sheets of Paxon and Saxon at January 1, 2019. Present the consolidated balance sheet, in good form, at the date of acquisition. C.
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
ChapterA2: Investments
Section: Chapter Questions
Problem 25E
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Transcribed Image Text:P3.4
Consolidated Balance Sheet Working Paper, Bargain Purchase On January 1, 2019, Paxon
Corporation acquired all of the outstanding common stock of Saxon Company for $1.7 billion cash. The
balance sheets of Paxon and Saxon, immediately prior to the combination, are shown below:
Balance Sheets (in millions)
Assets
Cash and receivables.
Inventory.
Equity method investments
Land..
Buildings and equipment, net
Total assets
Liabilities and Shareholders' Equity
Current liabilities..
Long-term debt
Common stock, par value
Additional paid-in capital.
Retained earnings
Total liabilities and shareholders' equity
Paxon
(in millions)
Inventory..
Equity method investments
Land....
Buildings and equipment, net
$2,860
1,700
-
650
2,400
$7,610
$1,500
2,000
500
1,200
2,410
$7,610
Saxon
$ 720
900
300
175
600
$2,695
$1,000
400
100
350
845
$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:
Estimated Fair Value
$800
250
420
900
L
In addition, Saxon had previously unrecorded identifiable assets valued at $110 million.
Required
a.
Calculate the gain on acquisition in this bargain purchase.
b. Prepare a working paper to consolidate the balance sheets of Paxon and Saxon at January 1, 2019.
Present the consolidated balance sheet, in good form, at the date of acquisition.
C.
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