Journal entries a-d with calculations and notations
PAT CORPORATION AND SUBSIDIARY P 10-3 CONSOLIDATION WORKSHEET FOR THE YEAR ENDED DECEMBER 31, 2011 80% Adjustments & Eliminations Consolidated (in thousands) Pat Sal Debits Credits Statements INCOME STATEMENT Sales 1,233 700 1,933 Income from Sal 68 a 68 0 Cost of sales (610) (400) (1,010) | Other expenses (390) 1 (210) (600) | Preacquisition income 4 (4) 1 Noncontrolling interest sha 18 (18) Net income 301 90 301 RETAINED EARNINGS Retained earnings beg 501 200 b 200 501 Net income 301 90 301 Dividends (200) (50) 34 (200) | 14 N Retained earnings end 602 240 602 BALANCE SHEET Cash 191 50 241 Other current assets 200 300 500 Plant assets 900 600 1,500 Investment in Sal 71 1 34 0 677 Goodwill 0 Total assets 2,002 950 2,241 Current liabilities 200 60 260 $10 preferred stock 100 C 100 0 Common stock 1,200 500 500 1,200 Other paid in capital 50 b 50 0 Retained earnings 602 240 602 Total equities 2,002 950 Noncontrolling interest - common 75 79 4 Noncontrolling interest-preferred 100 100 940 940 2,241Cost of 70% interest in Sal January 1, 2010 490 Implied total fair value of Sal 700 Book value acquired of common equity 700 Excess of fair value over book value 0 Cost of 20% interest in Sal April 1, 2011 152 Implied total fair value of Sal 760 Book value of Sal 760 Excess of fair value over book value 0 Sal's net income 90 Preferred income -10 Income to common 80 Income Sal's 68P 10-3 [Preferred stock] Consolidation workpaper (subsidiary preferred stock, equity method, mid-year purchase) Financial statements for Pat and Sal Corporations for 201 1 are summarized as follows (in thousands): Pat Sal Combined Income and Retained Earnings Statements for the Year Ended December 31 Sales $1,233 $700 Income from Sal 68 Cost of sales (610) (400) Other expenses (390 (210) Net income 301 90 Add: Retained earnings January 1 501 200 Less: Dividends (200) 50) Retained earnings December 31 $ 602 $240 Pat Sal Balance Sheet at December 31 Cash $ 191 $ 50 Other current assets 200 300 Plant assets-net 900 600 Investment in Sal 711 Total assets $2,002 $950 Current liabilities $ 200 $ 60 $10 preferred stock 100 Common stock 1,200 500 Other paid-in capital 50 Retained earnings 602 240 Total equities $2,002 $950 Pat owns 90,000 shares of Sal's outstanding voting common stock at December 31, 2011. These shares were acquired in two lots as follows: Date Shares Purchase Price Lot 1 January 1, 2010 70,000 $490,000 Lot 2 April 1, 2011 20,000 152,000 The stockholders' equity of Sal at year-end 2009, 2010, and 2011 was as follows (in thousands): December 31 2009 2010 2011 $10 preferred stock, $100 par, cumulative $100 $100 $100 with no dividends in arrears Common stock, $5 par 500 500 500 Other paid-in capital 50 50 50 Retained earnings 150 200 240 Total stockholders' equity $800 $850 $890 Sal's net income for 201 1 is $90,000, earned proportionately throughout the year, and its quar- terly dividends of $12,500 are declared on March 15, June 15, September 15, and December 15. (Quarterly dividends of $12,500 include dividends on common stock and preferred stock.) There are no intercompany receivables or payables at December 31, 2011, and there have been no inter- company transactions other than dividends. REQUIRED: Prepare a consolidation workpaper for Pat and Subsidiary for 201 1
