Question 1 Pam Corporation acquired a 70 percent interest in Sun Corporation's outstanding voting common stock on January 1, 2016, for $980,000 cash. The stockholders' equity (book value) of Sun on this date consisted of $1,000,000 capital stock and $200,000 retained earnings. The differences between the fair value of Sun and the book value of Sun were assigned $10,000 to Sun's undervalued inventory, $28,000 to under-valued buildings, $42,000 to undervalued equipment, and $80,000 to previously unrecorded trademarks. Any remaining excess is goodwill. The undervalucd inventory items were sold during 2016, and the undervalued buildings and equipment had remaining useful lives of seven years and three years, respectively. The trademarks have a 40-year life. Depreciation is computed using the straight-line method. At December 31, 2016, Sun's accounts payable include $20,000 owed to Pam. This $20,000 account payable is due on January 15, 2017. Separate financial statements for Pam and Sun for 2016 are summarized as follows (in thousands): Sun $1,400 Pam $1,600 Sales Income from Sun Cost of sales Depreciation expense Other expenses Net income Add: Retained carnings January 1 Deduct: Dividends Retained earnings December 31 Cash Accounts receivable-net Dividends receivable Inventories Other current assets Land 119 (800) (120) (280) 200 200 (100) S 300 S 120 (600) (308) (320) $491 600 (400) S 691 S 172 200 140 28 300 200 140 60 100 200 320 Buildings-net Equipment-net Investment in Sun Total assets 280 1,140 1,029 S3,389 S 400 660 $1,700 Accounts payable Dividends payable Other liabilities Capital stock, $20 par Retained earnings Total equities Required: S 170 200 40 98 190 2,000 1,000 300 691 $3,389 $1,700 1. Prepare consolidated workpapers for Pam Corporation and Subsidiary for the year ended December 31, 2016. Please provide your answer for this requirement on page 2 2. Show all of the C-E-A-D-I eliminating entries that were made during the consolidation process for 2016 in a general journal entry format. Pam Corporation uses the full equity method to account for its investments. Please provide your answer for this requirement on page 3. Consolidation statements worksheet Pam Company and Subsidiary For the year ended December 31, 2016 Question 1 Eliminations Debit Consolidate Pam Sun Credit Income statement: Sales Cost of goods sold Gross profit Equity income Depreciation expense Amortization expense Other expenses Net income (P/S only net income) Consolidated net income NCI-Income Consolidated NI -Controlling interests S1,600 (600) $1,000 $1.400 (800) $600 119 (308) (120) (320) $491 (280) $200 Statement of RE Retained earmings, 1/ Net income Dividends $600 491 $200 200 (400) S 691 (100) S 300 Retained earings, 12/31 Balance sheet: Cash $120 $172 Accounts receivable-net 200 28 140 Dividends receivable Inventories Other current assets Land 300 200 140 60 200 100 Building-net Equipment-net 280 320 1,140 660 Trademark Goodwill Equity investment 1,029 S 3,389 $1,700 Total Assets Liabilities $ 170 S 400 Accounts payable Dividend payable Other current liabilities Capital stock, $20 par Retained earnings 200 40 98 190 2,000 691 1,000 300 NCI S 3,389 $1,700 Total liabilities and stockholders' equity Journal entries (Requirement 2) Account tities and descriptions Date P/R Debit Credit Question 1 Pam Corporation acquired a 70 percent interest in Sun Corporation's outstanding voting common stock on January 1, 2016, for $980,000 cash. The stockholders' equity (book value) of Sun on this date consisted of $1,000,000 capital stock and $200,000 retained earnings. The differences between the fair value of Sun and the book value of Sun were assigned $10,000 to Sun's undervalued inventory, $28,000 to under-valued buildings, $42,000 to undervalued equipment, and $80,000 to previously unrecorded trademarks. Any remaining excess is goodwill. The undervalucd inventory items were sold during 2016, and the undervalued buildings and equipment had remaining useful lives of seven years and three years, respectively. The trademarks have a 40-year life. Depreciation is computed using the straight-line method. At December 31, 2016, Sun's accounts payable include $20,000 owed to Pam. This $20,000 account payable is due on January 15, 2017. Separate financial statements for Pam and Sun for 2016 are summarized as follows (in thousands): Sun $1,400 Pam $1,600 Sales Income from Sun Cost of sales Depreciation expense Other expenses Net income Add: Retained carnings January 1 Deduct: Dividends Retained earnings December 31 Cash Accounts receivable-net Dividends receivable Inventories Other current assets Land 119 (800) (120) (280) 200 200 (100) S 300 S 120 (600) (308) (320) $491 600 (400) S 691 S 172 200 140 28 300 200 140 60 100 200 320 Buildings-net Equipment-net Investment in Sun Total assets 280 1,140 1,029 S3,389 S 400 660 $1,700 Accounts payable Dividends payable Other liabilities Capital stock, $20 par Retained earnings Total equities Required: S 170 200 40 98 190 2,000 1,000 300 691 $3,389 $1,700 1. Prepare consolidated workpapers for Pam Corporation and Subsidiary for the year ended December 31, 2016. Please provide your answer for this requirement on page 2 2. Show all of the C-E-A-D-I eliminating entries that were made during the consolidation process for 2016 in a general journal entry format. Pam Corporation uses the full equity method to account for its investments. Please provide your answer for this requirement on page 3. Consolidation statements worksheet Pam Company and Subsidiary For the year ended December 31, 2016 Question 1 Eliminations Debit Consolidate Pam Sun Credit Income statement: Sales Cost of goods sold Gross profit Equity income Depreciation expense Amortization expense Other expenses Net income (P/S only net income) Consolidated net income NCI-Income Consolidated NI -Controlling interests S1,600 (600) $1,000 $1.400 (800) $600 119 (308) (120) (320) $491 (280) $200 Statement of RE Retained earmings, 1/ Net income Dividends $600 491 $200 200 (400) S 691 (100) S 300 Retained earings, 12/31 Balance sheet: Cash $120 $172 Accounts receivable-net 200 28 140 Dividends receivable Inventories Other current assets Land 300 200 140 60 200 100 Building-net Equipment-net 280 320 1,140 660 Trademark Goodwill Equity investment 1,029 S 3,389 $1,700 Total Assets Liabilities $ 170 S 400 Accounts payable Dividend payable Other current liabilities Capital stock, $20 par Retained earnings 200 40 98 190 2,000 691 1,000 300 NCI S 3,389 $1,700 Total liabilities and stockholders' equity Journal entries (Requirement 2) Account tities and descriptions Date P/R Debit Credit