P 3-1 Prepare a consolidated balance sheet at acquisition and compute consolidated net income one year laterOn 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 $20,000 on accounts payable. (All amounts are in thousands.) PamSunAssets  Cash$ 128        $ 72        Accounts receivable180        136        Inventories572        224        Investment in Sun800         Equipment—net1,520        700         $3,200        $1,132        Liabilities and Stockholders’ Equity  Accounts payable$ 160        $ 132        Common stock, $20 par1,840        600        Retained earnings1,200        400         $3,200        $1,132        RequiredPrepare a consolidated balance sheet for Pam Corporation and Subsidiary at December 31, 2016.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 income from the investment in Sun.)

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Asked Nov 26, 2019
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P 3-1 Prepare a consolidated balance sheet at acquisition and compute consolidated net income one year later

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        

Investment in Sun

800        

 

Equipment—net

1,520        

700        

 

$3,200        

$1,132        

Liabilities and Stockholders’ Equity

 

 

Accounts payable

$ 160        

$ 132        

Common stock, $20 par

1,840        

600        

Retained earnings

1,200        

400        

 

$3,200        

$1,132        

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 income from the investment in Sun.)

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Expert Answer

Step 1

A consolidated balance sheet introduces the assets and liabilities of a parent organization and every one of its auxiliaries on one single report, irrespective of any differentiation in the items belonging to different organizations.

Step 2

1 . To prepare consolidated balance sheet

Non-controlling interest= 100% – 80% = 20%

Consolidated Balance sheet of company PC
For the year ended 31* Dec. 2016
Amount
Assets
Cash (128 72)
Accounts receivable (180 + 136 -20)
Inventories (572+ 224)
Equipment (1,520+700)
Total Assets
200
296
796
2,220
3,512
Liabilities and stockholder's equity
Accounts payable (160 + 132 - 20)
Stockholder's equity
Common stock @10 par
Retained earnings
Non-controlling interest (600 + 400) x 20%
Total liabilities and stockholder's equity
272
1,840
1,200
200
3,512
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Consolidated Balance sheet of company PC For the year ended 31* Dec. 2016 Amount Assets Cash (128 72) Accounts receivable (180 + 136 -20) Inventories (572+ 224) Equipment (1,520+700) Total Assets 200 296 796 2,220 3,512 Liabilities and stockholder's equity Accounts payable (160 + 132 - 20) Stockholder's equity Common stock @10 par Retained earnings Non-controlling interest (600 + 400) x 20% Total liabilities and stockholder's equity 272 1,840 1,200 200 3,512

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Step 3
  1. Consolidated Net income for 2...
Particulars
Separate income of P
Add: Income ofS
Amount ($)
680
360
1,040
Consolidated income
Less: Non-controlling interest share (360,000 x
20%)
Controlling interest share
72
968
help_outline

Image Transcriptionclose

Particulars Separate income of P Add: Income ofS Amount ($) 680 360 1,040 Consolidated income Less: Non-controlling interest share (360,000 x 20%) Controlling interest share 72 968

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