At December 31, 2016, Pam Corporation owes Sun $20,000 on accounts payable. (All

Question

At December 31, 2016, Pam Corporation owes Sun $20,000 on accounts payable. (All amounts are in thousands.)

1132

On December 31, 2016, Pam Corporation purchased 80 percent of the stock of Sun Company at book value. The data reported on their separate balance sheets immediately after the acquisition follow.

At December 31, 2016, Pam Corporation owes Sun $20,000 on accounts payable. (All amounts are in thousands.)

Pam Sun Assets Cash $128 $72 Accounts Receivable 180 136 inventories 572 224 investments in Sun 800 0 Equipment- Net 1520 700 3200 1132 Liabilites and Stockholders' Equity accounts payable 160 132 Common stock, $20 par 1840 600 Retained earnings 1200 400 3200

1132

REQUIRED 1. Prepare a consolidated balance sheet for Pam Corporation and Subsidiary at December 31, 2016. 2. Compute consolidated net income for 2017 assuming that Pam Corporation reported separate income of $680,000 and Sun Company reported net income of $360,000. (Separate incomes do not include incomefrom the investment in Sun).

Explanation / Answer

1. Consolidated balance sheet for Pam Corporation and Subsidiary at December 31, 2016. (All amounts are in thousands in $) ASSETS Cash (128+72)                       200 Accounts rece.(180+136-20)                       296 Invenrories (572+224)                       796 Equipment (1520+700)                    2,220                    3,512 Liabilites and Stockholders' Equity   accounts payable (160+132-20)                       272 Common stock and Retained earnings(Note 1)                    3,040 Minority interest (1000*20%)                       200                    3,512 Note :1 Common stock and Retained earnings of PAM                    3,040 Add :Common stock and Retained earning of Sun acquired by PAM (1000*80%)                       800 Less : Investment in Sun by PAM                       800 Consodilated Common stock and Retained earnings                    3,040 2. Consolidated net income for 2017 assuming that Pam Corporation reported separate income of      $680,000 and Sun Company reported net income of $360,000. (Separate incomes do not include incomefrom the investment in Sun). amounts in $ Net income of PAM Corporation              6,80,000 Share of PAM Corporation in income of SUN ($ 360,000*80%)              2,88,000              9,68,000

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