Padilla Company acquired 80% of the outstanding common stock of Sanchez Company on June 30, 2014 for $388,000. On that date, Sanchez Company had retained earnings of $60,000, and the fair value of its recorded assets and liabilities was equal to the book value. The excess of implied over fair value of the recorded net assets was attributed to an unrecorded manufacturing formula held by Sanchez Company, which had an expected remaining useful life of five years from June 30,2014.

Financial date for 2016 are presented below:

	Padilla Company	Sanchez Company
Sales	$2,555,500	$1,120,000
Equity in subsidiary income	147,200
Total revenue	2,711,550	1,120,000
Cost of goods sold	1,730,000	690,500
Expenses	654,500	251,000
Total cost and expense	2,384,500	941,500
Net income	327,050	178,500
1/1 retained earnings	591,200	139,500
Net income	327,050	178,500
Dividends declared	(100,000)	(60,000)
12/31 retained earnings	818,250	258,000
Cash	119,500	132,500
Accounts receivable	342,000	125,000
Inventory	362,000	201,000
Other current assets	40,500	13,000
Land	150000
Investment in Sanchez Company	422,400
Property and equipment	825,000	241,000
Accumulated depreciation	(207,000)	(53,500)
Total assets	2,156,250	659,000
Accounts payable	226,249	32,000
Other liabilities	18,751	19,000
Capital stock	1,000,000	300,000
Additional paid-in capital		50,000
Retained earnings	818,250	258,000
Total liabilities and equity	2,156,250	659,000

On December 31, 2014, Padilla Company sold equipment (with an original cost of $100,000 and accumulated depreciation of $50,000) to Sanchez Company for $160,000. This equipment has since been depreciated at an annual rate of 20% of the purchase price. During 2015, Sanchez Company sold land to Padilla Company at a profit of $19,000.

The inventory of Padilla Company on December 31, 2015, included goods purchased from Sanchez Company on which Sanchez Company recognized profit of $9,000. During 2016, Sanchez Company sold goods to Padilla Company for $375000, of which $60000 was unpaid on December 31, 2016. The December 31, 2016 inventory of Padilla Company included goods acquired from Sanchez Company on which Sanchez Company recognized a profit of $16,000.

Required: Prepare a consolidated financial statements work paper for the year ended December 31, 2016

PADILLA COMPANY AND SUBSIDIARY Consolidated Statements Workpaper For the Year Ended December 31, 2016 P7 17V3 Padilla Company Sanchez Company Eliminations Drobil Norcontrolling Interest Consolidalcd Balances Credit 1,120,000 INCOME STATEMENT Sales Equity income Total revenue Cost of goods sold 2,555,500 147 200 2.702,700 1.730.000 1,120.000 690,500 } 654,500 2.384.500 318,200 251.000 941.500 178.500 Expenses Total cost & expense Nel carissical income Noncliclinica interest in income Nat income to retained eamings 31.300 318.200 178,500 31,300 139.500 178.500 31.300 STATEMENT OF RETAINED EARNINGS 1/1 Retained eamings: Padila Company 591.200 Sanchez Company Net Income from above 318.200 Dividend declared: Padila Company 1100 000) Sanchez Company 12/31 Retained earings to balance sheet 809,400 160.000) 258,000 31,300 Padilla Company Sanchez Company Noncontrolling Interest Consolidated Balances BALANCE SHEET Cash Accounts Receivable Inventory Other current assets Investment in Sanchez 119.500 342.000 362.000 40.500 422.400 132.500 125,000 201,000 13,000 Difference between implied and book value Land 150.000 Plant and equipment 825,000 Accumulated topicciali 207.000) Manufacturing formula Total Assets 2,054,400 241.000 (50.500) 659.000 32 000 19.000 Accounts Payable 226.249 Other Liabilities 18 751 Capital stock: Padila Company 1.000.000 Sanchez Company Additional paid in capital Sanchez Company Retained oamings from 209.400 1/1 Noncontrolling interest in net assets 300.000 50,000 250,000 31,300 #VALUE! EVALUEI 12/31 Nemiconcalling inleres in relassels Total liabilities & equ 2,054,400 659,000 PADILLA COMPANY AND SUBSIDIARY Consolidated Statements Workpaper For the Year Ended December 31, 2016 P7 17V3 Padilla Company Sanchez Company Eliminations Drobil Norcontrolling Interest Consolidalcd Balances Credit 1,120,000 INCOME STATEMENT Sales Equity income Total revenue Cost of goods sold 2,555,500 147 200 2.702,700 1.730.000 1,120.000 690,500 } 654,500 2.384.500 318,200 251.000 941.500 178.500 Expenses Total cost & expense Nel carissical income Noncliclinica interest in income Nat income to retained eamings 31.300 318.200 178,500 31,300 139.500 178.500 31.300 STATEMENT OF RETAINED EARNINGS 1/1 Retained eamings: Padila Company 591.200 Sanchez Company Net Income from above 318.200 Dividend declared: Padila Company 1100 000) Sanchez Company 12/31 Retained earings to balance sheet 809,400 160.000) 258,000 31,300 Padilla Company Sanchez Company Noncontrolling Interest Consolidated Balances BALANCE SHEET Cash Accounts Receivable Inventory Other current assets Investment in Sanchez 119.500 342.000 362.000 40.500 422.400 132.500 125,000 201,000 13,000 Difference between implied and book value Land 150.000 Plant and equipment 825,000 Accumulated topicciali 207.000) Manufacturing formula Total Assets 2,054,400 241.000 (50.500) 659.000 32 000 19.000 Accounts Payable 226.249 Other Liabilities 18 751 Capital stock: Padila Company 1.000.000 Sanchez Company Additional paid in capital Sanchez Company Retained oamings from 209.400 1/1 Noncontrolling interest in net assets 300.000 50,000 250,000 31,300 #VALUE! EVALUEI 12/31 Nemiconcalling inleres in relassels Total liabilities & equ 2,054,400 659,000