Pik Corporation acquired 80 percent of Sel Corporation's common stock on January 1, 2011, for $420,000 cash. The stockholders' equity of Sel at this time consisted of $300,000 capital stock and $100,000 retained earnings. The difference between the fair value of Sel and the underlying equity acquired in Sel was due to a $25,000 undervaluation of Sel's inventory, a $50,000 undervaluation of Sel's equipment, and goodwill.

The undervalued inventory was sold by Sel during 2011, and the undervalued equipment had a remaining useful life of five years. Straight-line depreciation is used.

Sel owed Pik $8,000 on accounts payable at December 31, 2011.

The separate financial statements of Pik and Sel Corporations at and for the year ended December 31, 2011, are as follows (in thousands):

REQUIRED
Prepare consolidation workpapers for Pik Corporation and Sel at and for the year ended December 31, 2011.

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Pik Combined Income and Retained Earnings Statements for the Year Ended December 31 $ 400 $220 Income from Sel Cost of sales Depreciation expense Other expenses (80) (40) (5D (20) 100 (160) (80) Net income Add: Retained earnings January 1 Deduct: Dividends 145 150 40) Retained earnings December 31 215 40 Balance Sheet at December 31 $ 59 S 60 Trade receivables-net Dividends receivable Inventories 16 Buildings-net Equipment net Investment in Sel Total assets 130 140 $1,195 S600 $100 Accounts payable Dividends payable Other liabilities Capital stock, $10 par Retained S 80 100 earnings 140 Total equities S1.195