Can you please help with this problem. thanks P4-5Workpapers 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 stockon January 1, 2016, for $980,000 cash. The stockholders' equity (book value) of Sun on this date consistedof $1,000,000 capital stock and $200,000 retained earnings. The differences between the fair value ofSun and the book value of Sun were assigned $10,000 to Sun's undervalued inventory, $28,000 to under-valued 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 andequipment had remaining useful lives of seven years and three years, respectively. The trademarkshave a 40-year life. Depreciation is straight line.At December 31, 2016, Sun's accounts payable include $20,000 owed to Pam. This $20,000account payable is due on January 15, 2017. Separate financial statements for Pam and Sun for 2016are summarized as follows (in thousands):PamSunCombined Income and Retained EarningsStatements for the Year Ended December 31Sales$ 1,600$1,400119Income from Sun(600)(308)(320)491(800)(120)(280)200Cost of salesDepreciation expenseOther expensesNet income600200Add: Retained earnings January 1Deduct: Dividends 05Retained earnings December 31(400)2 691(100)$4300 PamSun016 $ 12000 140 ABalance Sheet at December 312$$172CashAccounts receivable-netDividends receivable20028nou300200Inventories60140ot sidavi100Other current assetsLand200280320Buildings-netEquipment-netInvestment in Sun1,1401,029$ 3,389 $1,700660Total assetsAccounts payableDividends payableOther liabilities$ 400200ldevo98 022,000ld 1,000691 012$3,389$ 17040oi olde 190Capital stock, $20 parRetained earningsTotal equities300m $1,700REQUIRED:Prepare consolidation workpapers for Pam Corporation and Subsidiary for the year endedDecember 31, 2016. Use an unamortized excess account.BAcbere co

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Can you please help with this problem. thanks

P4-5
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 under-
valued 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
119
Income from Sun
(600)
(308)
(320)
491
(800)
(120)
(280)
200
Cost of sales
Depreciation expense
Other expenses
Net income
600
200
Add: Retained earnings January 1
Deduct: Dividends 05
Retained earnings December 31
(400)
2 691
(100)
$4300

Pam
Sun
016 $ 120
00 140 A
Balance Sheet at December 31
2$
$172
Cash
Accounts receivable-net
Dividends receivable
200
28
nou
300
200
Inventories
60
140
ot sidavi
100
Other current assets
Land
200
280
320
Buildings-net
Equipment-net
Investment in Sun
1,140
1,029
$ 3,389 $1,700
660
Total assets
Accounts payable
Dividends payable
Other liabilities
$ 400
200ldevo
98 02
2,000ld 1,000
691 012
$3,389
$ 170
40
oi olde 190
Capital stock, $20 par
Retained earnings
Total equities
300
m $1,700
REQUIRED:Prepare consolidation workpapers for Pam Corporation and Subsidiary for the year ended
December 31, 2016. Use an unamortized excess account.
BAcbere co

Expert Solution

Step 1

Consolidated statements:

Consolidated financial statements consist of Balance sheet, Income statement, Cost sheet, etc. Consolidated financial statements are those statements that are strictly have collective information of a parent company and its subsidiaries. GAAP and IFRS include various provisions that help to create the framework for consolidated subsidiary financial statement reporting

Step 2

Consolidate income statement is as follows:

Step 3

Calculation:

Step 4

Consolidated retained earning statement is as follows:

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