Pan Corporation acquired 100 percent of Sal Corporation's outstanding voting common stock on January 1, 2011, for $660,000 cash. Sal's stockholders' equity on this date consisted of $300,000 capital stock and $300,000 retained earnings. The difference between the fair value of Sal and the underlying equity acquired in Sal was allocated $30,000 to Sal's undervalued inventory and the remainder to goodwill. The undervalued inventory items were sold by Sal during 2011. Pan made sales of $100,000 to Sal at a gross profit of $40,000 during 2011; during 2012, Pan made sales of $120,000 to Sal at a gross profit of $48,000. One-half the 2011 sales were inventoried by Sal at year-end 2011, and one-fourth the 2012 sales were inventoried by Sal at year-end 2012. Sal owed Pan $17,000 on account at December 31, 2012. The separate financial statements of Pan and Sal Corporations at and for the year ended December 31, 2012, are summarized as follows:

REQUIRED: Prepare workpapers to consolidate the financial statements of Pan Corporation and Subsidiary at and for the year ended December 31,2012.

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Pan Sal Combined Income and Retained Earnings Statements for the Year Ended December 31, 2012 (in thousands) $ 800 Sales $400 Income from Sal Cost of sales 108 (200) (40 (60) 100 (400) (110) Depreciation expense Other expenses Net income Beginning retained earnings Less: Dividends (192) 206 606 (100) 380 (50 $ 712 Retained earnings December 31, 2012 Balance Sheet at December 31, 2012 Cash $430 $ 37 $ 54 Receivables-net Inventories Other assets Land 90 100 60 80 70 50 90 50 Buildings-net Equipment-net Investment in Sal 200 500 150 400 748 Total assets $1,812 S867 160 Accounts payable $ 47 90 Other liabilities Common stock, $10 par Retained earnings Total equities 340 600 300 430 712 $1,812 $867