E 6-4Journal entries and consolidated income statement (downstream sale of building)Sun is a 90 percent-owned subsidiary of Pam Corporation, acquired at book value several years ago. Comparativeseparate-company income statements for the affiliates for 2016 are as follows:Pam CorporationSun CorporationSalesIncome from SunGain on building$750,00054,00015,000819,000500,000$350,000350,000200,00075,000275,000$ 75,000Income creditsCost of salesOperating expensesIncome debits150,000650,000$169,000Net incomeOn January 5, 2016, Pam sold a building with a 10-year remaining useful life to Sun at a gain of $15,000. Sun paiddividends of $50,000 during 2016.REQUIRED1. Reconstruct the journal entries made by Pam during 2016 to account for its investment in Sun. Explanationsof the journal entries are required.2. Prepare a consolidated income statement for Pam Corporation and Subsidiary for 2016.

The Journal is the primary book in the books of accounts of any entity. It simply records all…

Sun is a 90 percent-owned subsidiary of Pam Corporation, acquired at book value several years ago. Comparative separate-company income statements for the affiliates for 2016 are as follows: Pam Corporation Sun Corporation $750,000 54,000 15,000 819,000 500,000 150,000 650,000 $169,000 Sales $350,000 Income from Sun Gain on building Income credits 350,000 Cost of sales Operating expenses Income debits 200,000 75,000 275,000 $ 75,000 Net income On January 5, 2016, Pam sold a building with a 10-year remaining useful life to Sun at a gain of $15,000. Sun paid dividends of $50,000 during 2016. REQUIRED 1. Reconstruct the journal entries made by Pam during 2016 to account for its investment in Sun. Explanations of the journal entries are required. 2. Prepare a consolidated income statement for Pam Corporation and Subsidiary for 2016.

Sun is a 90 percent-owned subsidiary of Pam Corporation, acquired at book value several years ago. Comparative separate-company income statements for the affiliates for 2016 are as follows: Pam Corporation Sun Corporation $750,000 54,000 15,000 819,000 500,000 150,000 650,000 $169,000 Sales $350,000 Income from Sun Gain on building Income credits 350,000 Cost of sales Operating expenses Income debits 200,000 75,000 275,000 $ 75,000 Net income On January 5, 2016, Pam sold a building with a 10-year remaining useful life to Sun at a gain of $15,000. Sun paid dividends of $50,000 during 2016. REQUIRED 1. Reconstruct the journal entries made by Pam during 2016 to account for its investment in Sun. Explanations of the journal entries are required. 2. Prepare a consolidated income statement for Pam Corporation and Subsidiary for 2016.

FINANCIAL ACCOUNTING

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ISBN:9781259964947

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Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Concept explainers

Consolidation

Consolidation in general examination implies an asset oscillating between well-defined methods of trading status. Consolidation is commonly known as market indecisiveness, which completes when the asset's values move forward or backward the trading structure.

Question

E 6-4
Journal entries and consolidated income statement (downstream sale of building)
Sun is a 90 percent-owned subsidiary of Pam Corporation, acquired at book value several years ago. Comparative
separate-company income statements for the affiliates for 2016 are as follows:
Pam Corporation
Sun Corporation
Sales
Income from Sun
Gain on building
$750,000
54,000
15,000
819,000
500,000
$350,000
350,000
200,000
75,000
275,000
$ 75,000
Income credits
Cost of sales
Operating expenses
Income debits
150,000
650,000
$169,000
Net income
On January 5, 2016, Pam sold a building with a 10-year remaining useful life to Sun at a gain of $15,000. Sun paid
dividends of $50,000 during 2016.
REQUIRED
1. Reconstruct the journal entries made by Pam during 2016 to account for its investment in Sun. Explanations
of the journal entries are required.
2. Prepare a consolidated income statement for Pam Corporation and Subsidiary for 2016.

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