Question
P5-7 Consoilidation workpapers (upstream sales, noncontrolling interest) Pam Corporation purchased a 90 percent interest in Sun Corporation on December 31, 2015, for $2,700,00 cash, when
Pam Corporation purchased a 90 percent interest in Sun Corporation on December 31, 2015, for $2,700,00 cash, when Sun had capital stock for $2,000,000 and retained earnings of $500,000. All Suns assets and liabilities were recorded at fair values when Pam acquired its interest. The excess of fair value over book value is due to previously unrecorded patents and is being amortized over a 10-year period.
The Pam-Sun affiliation is a vertically integrated merchandising operation, with Sun selling all of its output to Pam Corporation at 140 percent of its cost. Pam sells the merchandise acquired from Sun at 150 percent of its purchase price from Sun. All of Pams December 31, 2016, and December 31, 2017, inventories of $280,00 and $420,00, respectively, were acquired by Sun. Suns December 31, 2016, and December 31, 2017 inventories were $800,00 each.
Pams accounts payable at December 31, 2017, includes $100,000 owed to Sun from 2017 purchases.
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