Summary income statement information for Pam Corporation and its 70 percent-owned subsidiary, Sun, for the year 2017 is as follows (in thousands):
___________________________ Pam ___________ Sun
Sales .................................$4,000 .......... $ 1,600
Income from Sun .....................196 ................-
Cost of sales .........................(2,400) ............(800)
Depreciation expense ................(200) ............(160)
Other expenses ........................(796) ............(360)
Net income ...........................$ 800 ............$ 280
Required
1. Assume that Pam acquired its 70 percent interest in Sun at book value on January 1, 2016, when the fair value of Sun's assets and liabilities were equal to recorded book values. There were no intercompany transactions during 2016 and 2017. Prepare a consolidated income statement for Pam Corporation and Subsidiary for 2017.
2. Assume that Pam acquired its 70 percent interest in Sun on January 1, 2016, for $560,000. $120,000 was allocated to a reduction of overvalued equipment with a five-year remaining useful life and the remainder was allocated to goodwill. Sun's book value was $640,000. There were no intercompany transactions during 2016 and 2017. Prepare a consolidated income statement for Pam Corporation and Subsidiary for 2017.