NAME HERE PAR CORPORATION AND SUBSIDIARY P 7-6 CONSOLIDATION WORKSHEET FOR THE YEAR ENDED DECEMBER 31, 2012 75% Adjustments & Eliminations (in thousands) Par Sal Debits Credits Consolidated INCOME STATEMENT Sales 630 500 1,130 Gain on plant 30 30 Income from Sal 52 52 Gain on bonds 0 Cost of sales (350) (300) (650) Depreciation expense (76) (40) | (116) Interest expense (20) | (20) Operating expense (46) (60) (106) Noncontrolling int. share 0 Net income 220 100 320 RETAINED EARNINGS Retained earnings - Par 150 150 Retained earnings - Sal 100 100 Net income 220 100 320 Dividends (160) (80) (240) Retained earnings - end 210 120 330 BALANCE SHEET Cash 27 81 108 Bond interest receivable 5 5 Other receivables 40 30 70 Inventories 80 50 130 Land 90 70 160 Buildings-net 150 180 330 Equipment-net 140 90 230 Investment in Sal stock 343 343 Investment in Par bonds 94 94 Total assets 870 500 1,470 Accounts payable 50 80 130 Bond interest payable 10 10 10% bonds payable 200 200 Common stock 400 400 800 Retained earnings 210 120 330 Total equities 870 600 Noncontrolling interest 0 0 0 1,470P 7-6 Workpapers (constructive retirement of bonds, intercompany sales) Financial statements for Par Corporation and its 75 percent-owned subsidiary, Sal Corporation, for 2012 are summarized as follows (in thousands): Par Sal Combined Income and Retained Earnings Statement for the Year Ended December 31, 2012 Sales $630 $500 Gain on plant 30 Income from Sal 52 Cost of goods sold (350) (300) Depreciation expense (76 (40) Interest expense (20 Other expenses (46) (60) Net income 220 100 Add: Beginning retained earnings 150 100 Deduct: Dividends (160) (80 Retained earnings December 31 $210 $120 Balance Sheet at December 31, 2012 Cash $ 27 $ 81 Bond interest receivable 5 Other receivables-net 40 30 Inventories 80 50 Land 90 70 Buildings-net 150 180 Equipment-net 140 90 Investment in Sal 343 - Investment in Par bonds 94 Total assets $870 $600 Accounts payable $ 50 $ 80 Bond interest payable 10 10% bonds payable 200 Common stock 400 400 Retained earnings 210 120 Total equities $870 $600 Par Corporation acquired its interest in Sal at book value during 2009, when the fair values of Sal's assets and liabilities were equal to recorded book values. ADDITIONAL INFORMATION 1. Par uses the equity method for its investment in Sal. 2. Intercompany sales of merchandise between the two affiliates totalled $50,000 during 2012. All inter- company balances have been paid except for $10,000 in transit from Sal to Par at December 31, 2012. 3. Unrealized profits in Sal's inventories of merchandise acquired from Par were $12,000 at December 31, 2011, and $15,000 at December 31, 2012. 4. Sal sold equipment with a six-year remaining useful life to Par on January 2, 2010, at a gain of $24,000. The equipment is still in use by Par. 5. Par sold a plant to Sal on July 1, 2012. The land was sold at a gain of $10,000 and the building, which had a remaining useful life of 10 years, at a gain of $20,000. 6. Sal purchased $100,000 par of Par 10 percent bonds in the open market for $94,000 plus $5,000 accrued interest on December 31, 2012. Interest is paid semiannually on January 1 and July 1, and the bonds mature on January 1, 2017. REQUIRED: Prepare a consolidation workpaper for Par Corporation and Subsidiary for the year ended December 31, 2012
