18 Workpapers (year of acquisition, fair value/book value differentials, intercompany balances) Pik Corporation acquired 80 percent of Sel Corporation's common stock on January 1, 2011, for $210,000 cash. The stockholders' equity of Sel at this time consisted of $150,000 capital stock and $50,000 retained earnings. The difference between the fair value of Sel and the underlying equity acquired in Sel was due to a $12,500 undervaluation of Sel's inventory, a $25.000 undervaluation of Sel's cquipment, and goodwill. The undervalued inventory items were sold by Sel during 2011, and the undervalued equip- ment had a remaining useful life of five years. Straight-line depreciation is used. Sel owed Pik $4,000 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): Pik Sel Combined Income and Relained Earnings Statements for the Year Ended December 31 Sales $200 $110 Income from Sel Cost of sales (80) (40) Depreciation expense (40) Other expenses (25.5) (10) Net income 72.5 Add: Retained earnings January 1 75 - 50 Deduct: Dividends (40) (20) Retained earnings Docember 31 $107.5 $ 70 Balance Sheet at December 31 Cash $ 295 $ 30 Trade receivables-net 28 40 Dividends receivable 8 Inventories 30 Land 30 Buildings ---Det 65 70 Equipment-net 200 100 Investment in Sel 212 Total assets $597.5 $300 Accounts payable $ 40 $ 50 Dividends payable 100 10 Other liabilities 50 20 Capital stock, S10 par 300 150 Retained earnings 107.5 70 Total equities $597.5 $300 (20) 40 40 15 REQUIRED: Prepare consolidation workpapers for Pik Corporation and Sel at and for the year eaded December 31, 2011 Consolidated statements Pik Corporation and Subsidiary Consolidation Workpapers for the year ended December 31, 2011 (in thousanda) 80+ Adjustments and Pik Sel Eliminations Income statement Sales $ 200 $ 110 Income from Sel 18 Cost of sales Depreciation expense 40. 200 other expenses 25.5. 10. Consolidated NI Noncontrolling share Controlling share of NI 22.3 IS 75 Retained Earnings Tetained earnings - Pik Retained earnings---Sel Controlling share of NY Dividends 72.5 40 $ 50 40 200 Retained earnings - Dec 31 102.5 S 20 $ $ 30 29.5 28 Balance Sheet Cash Trade receivables-net Dividenda receivable Inventories Land Buildingo-net Equipment-net Investment in Sel 40 15 30 30 70 100 65 200 212 Goodwill Excess 2..597.5 S 300 Accounts payable Dividende payable Other liabilities Capital stock Retained earnings $ 40 100 50 300 107.5 19 50 10 20 150 70 IS 300 $ 597.5 Noncontrolling interest January 1 Noncontrolling interest December 31