P4-3 Workpapers in year of acquisition (goodwill and intercompany transactions)

Pam Corporation acquired a 75 percent interest in Sun Corporation on January 1, 2016. Financial statements of Pam and Sun Corporations for the year 2016 are as follows (in thousands):

Pam Sun Combined Income and Retained Earnings Statements for the Year Ended December 31 Sales $1,600 $400 Income from Sun 55.2 —

Cost of sales (1,000) (200)

Other expenses (388) (104)

Net income 267.2 96 Add: Retained earnings January 1 720 136 Deduct: Dividends (200) (64)

Retained earnings December 31 $ 787.2 $168 Balance Sheet at December 31 Cash $ 212 $ 60 Accounts receivable—net 344 80 Dividends receivable from Sun 24 —

Inventories 380 40 Note receivable from Pam — 20 Land 260 120 Buildings—net 680 320 Equipment—net 520 200 Investment in Sun 727.2 —

Total assets $3,147.2 $840 Accounts payable $ 340 $ 40 Note payable to Sun 20 —

Dividends payable — 32 Capital stock, $10 par 2,000 600 Retained earnings 787.2 168 Total equities $3,147.2 $840 REQuI RED: Prepare consolidation workpapers for Pam Corporation and Subsidiary for the year ended December 31, 2016. Only the information provided in the financial statements is available; accordingly, your solution will require some standard assumptions. Sun owned unrecorded patents having a fair value of $224,000, and a useful life of 10 years.