P 5-6 Workpapers (noncontrolling interest, downstream sales, year after acquisition) Pay Corporation acquired a 75 percent interest in Sue Corporation for $1,200,000 on January 1, 2011, when Sue's equity consisted of $600,000 capital stock and $200,000 retained earnings. The fair values of Sue's assets and liabilities were equal to book values on this date, and goodwill is not amortized. Pay uses the equity method of accounting for Sue. During 2011, Pay sold inventory items to Sue for $320,000, and at December 31, 2011, Sue's inventory included items on which there were $40,000 unrealized profits. During 2012, Pay sold inventory items to Sue for $520,000, and at December 31, 2012, Sue's inventory included items on which there were $80,000 unrealized profits. On December 31, 2012, Sue owed Pay $60,000 on account for merchandise purchases. The
P 5-6 Workpapers (noncontrolling interest, downstream sales, year after acquisition) Pay Corporation acquired a 75 percent interest in Sue Corporation for $1,200,000 on January 1, 2011, when Sue's equity consisted of $600,000 capital stock and $200,000 retained earnings. The fair values of Sue's assets and liabilities were equal to book values on this date, and goodwill is not amortized. Pay uses the equity method of accounting for Sue. During 2011, Pay sold inventory items to Sue for $320,000, and at December 31, 2011, Sue's inventory included items on which there were $40,000 unrealized profits. During 2012, Pay sold inventory items to Sue for $520,000, and at December 31, 2012, Sue's inventory included items on which there were $80,000 unrealized profits. On December 31, 2012, Sue owed Pay $60,000 on account for merchandise purchases. The
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Show calculations,

Transcribed Image Text:P 5-6
Workpapers (noncontrolling interest, downstream sales, year after acquisition)
Pay Corporation acquired a 75 percent interest in Sue Corporation for $1,200,000 on January 1, 2011,
when Sue's equity consisted of $600,000 capital stock and $200,000 retained earnings. The fair values
of Sue's assets and liabilities were equal to book values on this date, and goodwill is not amortized. Pay
uses the equity method of accounting for Sue.
During 2011, Pay sold inventory items to Sue for $320,000, and at December 31, 2011, Sue's
inventory included items on which there were $40,000 unrealized profits. During 2012, Pay sold
inventory items to Sue for $520,000, and at December 31, 2012, Sue's inventory included items on
which there were $80,000 unrealized profits.
On December 31, 2012, Sue owed Pay $60,000 on account for merchandise purchases. The
financial statements of Pay and Sue Corporations at and for the year ended December 31, 2012, are
summarized as follows (in thousands):
Pay
Sue
Combined Income and Retained Earnings Statements
for the Year Ended December 31, 2012
Sales
$ 2,400
$ 1,600
Income from Sue
Cost of sales
410
(1,080)
(580)
(840)
(160)
Operating expenses
Net income
1,150
600
360
Beginning retained earnings
Deduct: Dividends
730
(600)
(200)
Retained earnings December 31, 2012
$ 1,280
$ 760
Pay
Sue
Balance Sheet at December 31, 2012
Cash
Accounts receivable
$ 340
$ 120
660
400
Dividends receivable
60
Inventories
240
320
Land
Buildings-net
Equipment-net
Investment in Sue
320
200
920
400
800
560
1,540
$ 4,880
$ 900
Total assets
$2,000
$ 400
Accounts payable
Dividends payable
280
80
Other liabilities
620
160
Common stock, $10 par
Retained earnings
Total equities
1,800
1,280
600
760
$ 4,880
$2,000
REQUIRED: Prepare consolidation workpapers for Pay Corporation and Subsidiary for the year ended
December 31, 2012.

Transcribed Image Text:Р5-6
PAY CORPORATION AND SUBSIDIARY
CONSOLIDATION WORKSHEET
FOR THE YEAR ENDED DECEMBER 31, 2012
75%
| Adjustments & Elimination
Consolidatec
(in thousands)
Рay
Sue
Debits
Credits
Statements
INCOME STATEMENT
Sales
2,400.0
1,600.0
4,000.0
Income from Sue
410.0 |
410.0
Cost of sales
(1,080.0) ||
(840.0) |
(1,920.0) ||
Operating expenses
(580.0) ||
(160.0) ||
(740.0)
1,750.0
Consolidated NI
0.0
Noncontrolling int. share. |
Controlling share
1,150.0
600.0
1,750.0
RETAINED EARNINGS
Retained earn-Pay
730.0
730.0
Retained earn-Sue
360.0 |
360.0
Controlling share
1,150.0
600.0
1,750.0
Dividends
(600.0) |
(200.0) |
(800.0)
Retained earn 12/31
1,280.0
760.0
2,040.0
BALANCE SHEET
Cash
340.0
120.0
460.0
Accounts receivable
660.0
400.0 |
1,060.0
Dividends receivable
60.0
60.0
Inventories
240.0 |
320.0 |
560.0
Land
320.0
200.0
520.0
920.0 |
400.0 |
Buildings-net
Equipment-net
1,320.0
560.0
1,360.0 |
1,540.0 |
800.0
Investment in Sue
1,540.0 |
Goodwill
0.0
Total assets
4,880.0
2,000.0
6,880.0
Accounts payable
Dividends payable
900.0
400.0
1,300.0
280.0
80.0
360.0
Other liabilities
620.0
160.0 |
780.0
Common stock - $10 par |
Retained earnings
Total equities
600.0 |
1,800.0 |
1,280.0
2,400.0
760.0
2,040.0 |
4,880.0
2,000.0
Noncontrolling interest
0.0
0.0
0.0
6,880.0
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