Pam acquired its 80 percent-owned controlling interest in Sam on January 2021. The intercompany transactions between Pam Corporation and Sam Corporation from January 2021 to December 31, 2024, are summarized as follows: 2021 Pam sold inventory items that cost $90,000 to Sam for $120,000. Sam sold $90,000 of these inventory items in 2021 and $30,000 of them in 2022. 2022 Pam sold inventory items that cost $45,000 to Sam for $60,000. All of these items were sold by Sam during 2023. 2023 Sam sold land with a book value of $60,000 to Pam at its fair market value of $82,500. This land is to be used as a future plant site by Pam. 2023 Pam sold equipment with a four-year remaining useful life to Sam on January 1 for $120,000. This equipment had a book value of $75,000 at the time of sale and will be still in use by Sam at December 31, 2024. 2024 Sam purchased $150,000 par of Pam’s 10% bonds in the bond market for $159,000 on January 2, 2024. These bonds had a book value of $147,000 when acquired by Sam and mature on January 1, 2028. The separate income of Pam (excludes income from Sam) and the reported net income of Sam for 2021 through 2024 were: 2021 2022 2023 2024Separate income of Pam $750,000 $562,500 $690,000 $765,000 Net income of Sam 150,000 180,000 165,000 180,000 Required 1. Compute Pam’s net income (and the controlling share of consolidated net income) for each of the years 2021 through 2024. (Use straight-line depreciation and amortization and take a full year’s depreciation on the equipment sold to Sam in 2023.)2. By reference to the data: Where a subsidiary purchases parent bonds at a price in excess of recorded book value, explain how the gain or loss is attributed to the parent or the subsidiary? Pam acquired its 80 percent-owned controlling interest in Sam on January 2021. The intercompanytransactions between Pam Corporation and Sam Corporation from January 2021 to December 31,2024, are summarized as follows:2021 Pam sold inventory items that cost $90,000 to Sam for $120,000. Sam sold $90,000 of theseinventory items in 2021 and $30,000 of them in 2022.2022 Pam sold inventory items that cost $45,000 to Sam for $60,000. All of these items were sold bySam during 2023.2023 Sam sold land with a book value of $60,000 to Pam at its fair market value of $82,500. This landis to be used as a future plant site by Pam.2023 Pam sold equipment with a four-year remaining useful life to Sam on January 1 for $120,000.This equipment had a book value of $75,000 at the time of sale and will be still in use by Sam atDecember 31, 2024.2024 Sam purchased $150,000 par of Pam's 10% bonds in the bond market for $159,000 on January2, 2024. These bonds had a book value of $147,000 when acquired by Sam and mature on January 1,2028.The separate income of Pam (excludes income from Sam) and the reported net income of Sam for2021 through 2024 were:2021202220232024Separate income$750,000$562,500$690,000$765,000of PamNet income of150,000180,000165,000180,000Sam Required1. Compute Pam's net income (and the controlling share of consolidated net income) for each of theyears 2021 through 2024. (Use straight-line depreciation and amortization and take a full year'sdepreciation on the equipment sold to Sam in 2023.)2. By reference to the data: Where a subsidiary purchases parent bonds at a price in excess of recordedbook value, explain how the gain or loss is attributed to the parent or the subsidiary?

Requirement 1: Compute Pam's Net Income and Controlling Share of Consolidated Net Income…

Pam acquired its 80 percent-owned controlling interest in Sam on January 2021. The intercompany transactions between Pam Corporation and Sam Corporation from January 2021 to December 31, 2024, are summarized as follows: 2021 Pam sold inventory items that cost $90,000 to Sam for $120,000. Sam sold $90,000 of these inventory items in 2021 and $30,000 of them in 2022. 2022 Pam sold inventory items that cost $45,000 to Sam for $60,000. All of these items were sold by Sam during 2023. 2023 Sam sold land with a book value of $60,000 to Pam at its fair market value of $82,500. This land is to be used as a future plant site by Pam. 2023 Pam sold equipment with a four-year remaining useful life to Sam on January 1 for $120,000. This equipment had a book value of $75,000 at the time of sale and will be still in use by Sam at December 31, 2024. 2024 Sam purchased $150,000 par of Pam's 10% bonds in the bond market for $159,000 on January 2, 2024. These bonds had a book value of $147,000 when acquired by Sam and mature on January 1, 2028. The separate income of Pam (excludes income from Sam) and the reported net income of Sam for 2021 through 2024 were: 2021 2022 2023 2024 Separate income $750,000 $562,500 $690,000 $765,000 of Pam Net income of 150,000 180,000 165,000 180,000 Sam Required 1. Compute Pam's net income (and the controlling share of consolidated net income) for each of the years 2021 through 2024. (Use straight-line depreciation and amortization and take a full year's depreciation on the equipment sold to Sam in 2023.) 2. By reference to the data: Where a subsidiary purchases parent bonds at a price in excess of recorded book value, explain how the gain or loss is attributed to the parent or the subsidiary?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter12: Intangibles

Section: Chapter Questions

Problem 18E

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Pam acquired its 80 percent-owned controlling interest in Sam on January 2021. The intercompany transactions between Pam Corporation and Sam Corporation from January 2021 to December 31, 2024, are summarized as follows: 2021 Pam sold inventory items that cost $90,000 to Sam for $120,000. Sam sold $90,000 of these inventory items in 2021 and $30,000 of them in 2022. 2022 Pam sold inventory items that cost $45,000 to Sam for $60,000. All of these items were sold by Sam during 2023. 2023 Sam sold land with a book value of $60,000 to Pam at its fair market value of $82,500. This land is to be used as a future plant site by Pam. 2023 Pam sold equipment with a four-year remaining useful life to Sam on January 1 for $120,000. This equipment had a book value of $75,000 at the time of sale and will be still in use by Sam at December 31, 2024. 2024 Sam purchased $150,000 par of Pam’s 10% bonds in the bond market for $159,000 on January 2, 2024. These bonds had a book value of $147,000 when acquired by Sam and mature on January 1, 2028. The separate income of Pam (excludes income from Sam) and the reported net income of Sam for 2021 through 2024 were: 2021 2022 2023 2024 Separate income of Pam $750,000 $562,500 $690,000 $765,000 Net income of Sam 150,000 180,000 165,000 180,000 Required 1. Compute Pam’s net income (and the controlling share of consolidated net income) for each of the years 2021 through 2024. (Use straight-line depreciation and amortization and take a full year’s depreciation on the equipment sold to Sam in 2023.) 2. By reference to the data: Where a subsidiary purchases parent bonds at a price in excess of recorded book value, explain how the gain or loss is attributed to the parent or the subsidiary?

Required
1. Compute Pam's net income (and the controlling share of consolidated net income) for each of the
years 2021 through 2024. (Use straight-line depreciation and amortization and take a full year's
depreciation on the equipment sold to Sam in 2023.)
2. By reference to the data: Where a subsidiary purchases parent bonds at a price in excess of recorded
book value, explain how the gain or loss is attributed to the parent or the subsidiary?

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