P2-11 Computations and a correcting entry (errors)

Pam Corporation purchased 40 percent of the voting stock of Sun Corporation on July 1, 2016, for

$600,000. On that date, Sun’s stockholders’ equity consisted of capital stock of $1,000,000, retained earnings of $300,000, and current earnings (just half of 2016) of $100,000. Income is earned proportionately throughout each year.

The Investment in Sun account of Pam Corporation and the retained earnings account of Sun Corporation for 2016 through 2019 are summarized as follows (in thousands):

RETAINED EARNINGS (SUN)

Dividends November 1, 2016 $80 Balance January 1, 2016 $300 Dividends November 1, 2017 80 Earnings 2016 200 Dividends November 1, 2018 100 Earnings 2017 160 Dividends November 1, 2019 100 Earnings 2018 260 Earnings 2019 240 INVESTMENT IN SUE (PAM)

Investment July 1, 2016 40% $600 Dividends 2016 $32 Income 2016 80 Dividends 2017 32 Income 2017 64 Dividends 2018 40 Income 2018 104 Dividends 2019 40 Income 2019 96 REQuIRED 1. Determine the correct amount of the investment in Sun that should appear in Pam’s December 31, 2019, balance sheet. Assume any difference between investment cost and book value acquired is due to goodwill.

2. Prepare any journal entry (entries) on Pam’s books to bring the Investment in Sun account up to date on December 31, 2019, assuming that the books have not been closed at year-end 2019.