Par Corporation acquired its 90 percent interest in Sam Corporation at its book value of $3,600,000 on January 1, 2011, when Sam had capital stock of $3,000,000 and retained earnings of $1,000,000. The December 31, 2011 and 2012, inventories of Par included merchandise acquired from Sam of $300,000 and $400,000, respectively. Sam realizes a gross profit of 40 percent on all merchandise sold. During 2011 and 2012, sales by Sam to Par were $600,000 and $800,000, respectively. Summary adjusted trial balances for Par and Sam at December 31, 2012, follow (in thousands):

REQUIRED
Prepare a combined consolidated income and retained earnings statement for Par Corporation and Subsidiary for the year ended December 31, 2012.

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Receivables-net Investment in Sam-90% Cost of sales Other expenses 12,500 Accounts payable Other liabilities Capital stock, $10 par Retained earnings Income from Sam $12,500