Parent Corporation acquired a 70 percent interest in Subsidiary Corporations outstanding voting common stock on January 1, 2011, for $735,000 cash. The stockholders equity of Subsidiary on this date consisted of $750,000 capital stock and $150,000 retained earnings. The difference between the fair value of Subsidiary and the underlying equity acquired in Subsidiary was assigned $7,500 to Subsidiarys undervalued inventory, $21,000 to undervalued buildings, $31,500 to undervalued equipment, and remainder assigned to goodwill.

The undervalued inventory items were Sold during 2011, and the undervalued buildings and equipment had remaining useful lives of seven years and three years, respectively. Depreciation is straight line.

At December 31, 2011, Subsidiarys accounts payable include $10,000 owed to Parent. This $10,000 account payable is due on January 15, 2012. Parent sold equipment to outsiders with a book value of $15,000 for $25,000 on June 1, 2011. This is not an intercompany sale transaction. Separate financial statements for Par and Subsidiary for 2011 are shown on the consolidated worksheet tab (in thousands):

REQUIRED: Prepare consolidation workpapers for Parent Corporation and Subsidiary for the year ended 12/31/2011. (Use the accompanying excel Worksheet for your solution. Show formulas).

You must follow these steps in order:

1. Complete the Preliminary Computation Tab first

PRELIMINARY COMPUTATIONS:
		Amt
[A]	Cost of 70% Interest at January 1st	$0
	Implied Fair Value of Subsidiary (gross up to 100%)	$0
	Book Value of Subsidiary	$0
	Excess of FV over BV	$0
	Non-Controlling Interest Share (30%)	$0
[B[	Allocation of Excess Fair Value over Book Value of Subsidiary:
	Undervalued inventory (Subsidiaryd in 2011)	$0
	Undervalued Buildings (7 year life)	$0
	Undervalued equipment (3 year life)	$0
	Remainder to Goodwill	$0
	Excess of FV over BV	$0
[C]	Calculation of Income from Subsidiary in 2011:
	Sul's Net Income	$0
	Less: Undervalued inventories Subsidiary in 2011	$0
	Less: Additional depreciation on buildings (1 year)	$0
	Less: Additional depreciation on Equipment (1 year)	$0
	= Sub's Adjusted Net Income	$0
[D]	Income Allocation for 2011:
	Parent's Controlling Interest Share (70%) =	$0
	Non-controlling Interest Share (30%) =	$0

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