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 price paid by Pan and the underlying equity acquired in Sal was allocated $30,000 to Sal's undervalued inventory and the remainder to patents with a five-year write-off period. 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 (in thousands):

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 Sales Income from Sal Cost of sales Depreciation expense Other expenses $ 800 102 (400) (110) (192) (200) (40) (60) 100 380 (50) $430 Net income Beginning retained earnings Less: Dividends 600 (100) 700 Retained earnings December 31, 2012 Balance Sheet at December 31, 2012 $54 90 100 70 50 200 S 37 Receivables -net Inventories Other assets Buildings-net Equipment-net Investment in Sal 150 736 Total assets $ 160 $ 47 Accounts payable Other liabilities Common stock, $10 par Retained earnings 600 700 $1.800 430 $867 Total equities