P 4-5 Workpapers in year of acquisition (excess recorded for inventory, building, equipment, trademarks, and goodwill) 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 undervalued buildings, $42,000 to undervalued equipment, and $80,000 to previously unrecorded trademarks. Any remaining excess is goodwill. The undervalued 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 straight line. 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): Pam Sun Combined Income and Retained Earnings Statements for the Year Ended December 31 Sales $ 1,600 $1,400 Income from Sun 119 — Cost of sales (600) (800) Depreciation expense (308) (120) Other expenses (320) (280) Net income 491 200 Add: Retained earnings January 1 600 200 Deduct: Dividends (400) (100) Retained earnings December 31 $ 691 $ 300 Balance Sheet at December 31 Cash $ 172 $ 120 Accounts receivable—net 200 140 Dividends receivable 28 — Inventories 300 200 Other current assets 140 60 Land 100 200 Buildings—net 280 320 Equipment—net 1,140 660 Investment in Sun 1,029 – Total assets $ 3,389 $1,700 Accounts payable $ 400 $ 170 Dividends payable 200 40 Other liabilities 98 190 Capital stock, $20 par 2,000 1,000 Retained earnings 691 300 Total equities $ 3,389 $1,700 Required Prepare consolidation workpapers for Pam Corporation and Subsidiary for the year ended December 31, 2016. Use an unamortized excess account.
P 4-5 Workpapers in year of acquisition (excess recorded for inventory, building, equipment, trademarks, and goodwill )
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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 $200,000retained 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 undervalued buildings, $42,000 to undervalued equipment, and $80,000 to previously unrecorded trademarks. Any remaining excess is goodwill.The undervalued 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 straight line.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):
Pam
Sun
Combined Income and Retained Earnings Statements for the Year Ended December 31
Sales
$ 1,600
$1,400
Income from Sun
119
—
Cost of sales
(600)
(800)
Depreciation expense
(308)
(120)
Other expenses
(320)
(280)
Net income
491
200
Add: Retained earnings January 1
600
200
Deduct: Dividends
(400)
(100)
Retained earnings December 31
$ 691
$ 300
Balance Sheet at December 31Cash
$ 172
$ 120
Accounts receivable —net200
140
Dividends receivable
28
—
Inventories
300
200
Other current assets
140
60
Land
100
200
Buildings—net
280
320
Equipment—net
1,140
660
Investment in Sun
1,029
–
Total assets
$ 3,389
$1,700
Accounts payable
$ 400
$ 170
Dividends payable
200
40
Other liabilities
98
190
Capital stock, $20 par
2,000
1,000
Retained earnings
691
300
Total equities
$ 3,389
$1,700
Required
Prepare consolidation workpapers for Pam Corporation and Subsidiary for the year ended December 31, 2016. Use an unamortized excess account.
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