P 4-1 Calculations five years after acquisition Pam Corporation purchased 75 percent of the outstanding voting stock of Sun Corporation for $4,800,000 on January 1, 2016. Sun’s stockholders’ equity on this date consisted of the following (in thousands): Capital stock, $10 par $2,000 Additional paid-in capital 1,200 Retained earnings December 31, 2015 1,600 Total stockholders’ equity $4,800 The excess fair value of the net assets acquired was assigned 10 percent to undervalued inventory (sold in 2016), 40 percent to undervalued plant assets with a remaining useful life of eight years, and 50 percent to goodwill. Comparative trial balances of Pam Corporation and Sun at December 31, 2020, are as follows (in thousands): Pam Sun Other assets—net $7,530 $5,200 Investment in Sun—75% 4,680 — Expenses (including cost of sales) 6,370 1,200 Dividends 1,000 400 $19,580 $6,800 Capital stock, $10 par $6,000 $2,000 Additional paid-in capital 1,700 1,200 Retained earnings 3,340 1,600 Sales 8,000 2,000 Income from Sun 540 — $19,580 $6,800 Required Determine the amounts that would appear in the consolidated financial statements of Pam Corporation and Subsidiary for each of the following items: Goodwill at December 31, 2020 Noncontrolling interest share for 2020 Consolidated retained earnings at December 31, 2019 Consolidated retained earnings at December 31, 2020
P 4-1 Calculations five years after acquisition
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Pam Corporation purchased 75 percent of the outstanding voting stock of Sun Corporation for $4,800,000 on January 1, 2016. Sun’s
stockholders’ equity on this date consisted of the following (in thousands):Capital stock, $10 par
$2,000
Additional paid-in capital
1,200
Retained earnings December 31, 20151,600
Total stockholders’ equity
$4,800
The excess fair value of the net assets acquired was assigned 10 percent to undervalued inventory (sold in 2016), 40 percent to undervalued plant assets with a remaining useful life of eight years, and 50 percent to
goodwill .Comparative
trial balances of Pam Corporation and Sun at December 31, 2020, are as follows (in thousands):Pam
Sun
Other assets—net
$7,530
$5,200
Investment in Sun—75%
4,680
—
Expenses (including cost of sales)
6,370
1,200
Dividends
1,000
400
$19,580
$6,800
Capital stock, $10 par
$6,000
$2,000
Additional paid-in capital
1,700
1,200
Retained earnings
3,340
1,600
Sales
8,000
2,000
Income from Sun
540
—
$19,580
$6,800
Required
Determine the amounts that would appear in the consolidated financial statements of Pam Corporation and Subsidiary for each of the following items:
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Goodwill at December 31, 2020
-
Noncontrolling interest share for 2020
-
Consolidated retained earnings at December 31, 2019
-
Consolidated retained earnings at December 31, 2020
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How was net income in question 4 determined?
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