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 $765,000Net income of Sam 150,000 180,000 165,000 180,000 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
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
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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