• Problem 1 Patty Corporation acquired a 75% of Sue Corporation for $300,000 on January 1, 2009, when Sue’s equity consisted of $150,000 capital stockand $50,000 retained earnings. The fari value of Sue’s assetsa and liabilities were equal to their book value on t his date, any goodwill is not amortized. Patty uses the equity method of accounting for Sue. During 2009, Patty sold inventory items to Sue for $80,000, and at December 31, 2009, Sue’s inventory included items on which there were $10,000 unrealized profits. During 2010, Patty sold inventory items fo Sue for $130,000, and at December 31, 2010, Sue’s inventory included items on which were $20,000 unrealized profits. On December 31, 2010, Sue owed $15,000 on account for merchandise purchases to Patty. The financial. Statements of Patty and Sue Corporations at and for the year ended December 31, 2010 are summarized as follows (in thousands): Instructions Prepare consolidation working papers for Patty Corporation and Subsidiary for the year ended December 31, 2010 Problem 2 Pat Corporation acquired a 75% interest in Sun Corporation for $300,000 on January 1, 2009, when Sun’s equity consisted of $150,000 capital stock and $50,000 retained earnings. The fair values of Sun’s assets and liabilities were equal to their book values on this date. The excess purchase price was allocated to an unrecorded patent, which ha a remaining life of 10 years. Pat uses the equity method of accounting for Sun. During 2009, Pat sold inventory items to Sun for $80,000, and at December 31, 2009, Sun’s inventory included items in which there were $10,000 unrealized profits. During 2010, Pat sold inventory items to Sun for $130,000, and at December 31, 2010, Sun’s inventory included items on which there were $20,000 unrealized profits. On December 31, 2010, Sun owed Pat $15,000 on account for merchandise purchases. The financial statements of Pat and Sun Corporations at and for the year ended December 31, 2010, are summarized as follows: Instructions Prepare consolidation working papers for Pat Corporation and Subsidiary for the year ended December 31, 2010.