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Pot Corporation acquired all the outstanding stock of Ski Corporation on April 1, 2011, for $15,000,000, when Ski's stockholders' equity consisted of $5,000,000 capital stock

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Pot Corporation acquired all the outstanding stock of Ski Corporation on April 1, 2011, for $15,000,000, when Ski's stockholders' equity consisted of $5,000,000 capital stock and $2,000,000 retained earnings. The price reected a $500,000 undervaluation of Ski's inventory (sold in 2011) and a $3,500,000 undenraluation of Ski's buildings (remaining useful life seven years from April 1, 2011). During 2012, Ski sold land that cost $1,000,000 to Pot for $1,500,000. Pot resold the land for $2,200,000 during 2015. Pot sells inventory items to Ski on a regular basis, as follows (in thousands): Penwnmge Percentage Unsaid by Ski l'npaid by SI: Salt-s to Ski Cost In PM all Year End at Year End 201 1 $ 500 3300 09": 0% 2012 1.1110 6(1) 30 50 2013 1.200 720 18 30 2014 1.1110 6\") 25 20 2015 1.500 900 20 20 Ski sold equipment with a book value of $800,000 to Pot on January 3, 2015, for $1,600,000. This equipment had a remaining useful life offouryears at the time of sale. Pot uses the equity method to account for its investment in Ski. The nancial statements for Pot and Ski are summarized as follows (in thousands): Put Ski Combined Income and Retained Earnings Statement for the Year Ended December 3], 2015 Sales 826.000 51 1.000 Gain on land 700 Gain on equipment 800 income from Ski 1.380 Cost of sales (15.000) 15.000) Deprecialion expense (3.700) 12.000) Other expenses (4,230! (2,800 Net income 5.100 2.000 Add: Beginning retained earnings 12.375 4.000 Deduct: Dividends 13.000) 11.000) Retained earnings December 31 514.475 3 5,000 Balance Sheet at December 31, 2015 Cash S 1.170 $ 500 Accounts receivablenet 2.000 1.500 Inventories 5.1110 2.000 Land 4.000 1.000 Buildingsnet 15.000 4.000 PM Ski Equ i pmc ntnet 1 0.000 4000 Investment in Ski 14,405 Total assets $51575 $11000 Accounts payable 5 4.100 5 1.000 Other liabilities 7.000 2.000 Capital stock 26.000 5.000 Retained earnings 14.475 5.000 El Total equities $51 575

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