P 3-6 Consolidated balance sheet workpapers with goodwill and dividendsPam Corporation paid $1,800,000 cash for 90 percent of Sun Corporation’s common stock on January 1, 2016, when Sun had $1,200,000 capital stock and $400,000 retained earnings. The book values of Sun’s assets and liabilities were equal to fair values. During 2016, Sun reported net income of $80,000 and declared $40,000 in dividends on December 31. Balance sheets for Pam and Sun at December 31, 2016, are as follows (in thousands): PamSunAssets  Cash$ 168          $ 80          Receivables—net200          520          Inventories1,400          200          Land600          800          Equipment—net2,400          400          Investment in Sun1,836                       $6,604          $2,000          Equities  Accounts payable$1,640          $ 320          Dividends payable240          40          Capital stock4,000          1,200          Retained earnings724          440           $6,604          $2,000          RequiredPrepare consolidated balance sheet workpapers for Pam Corporation and Subsidiary for December 31, 2016.

Question
Asked Nov 26, 2019
27 views

P 3-6 Consolidated balance sheet workpapers with goodwill and dividends

Pam Corporation paid $1,800,000 cash for 90 percent of Sun Corporation’s common stock on January 1, 2016, when Sun had $1,200,000 capital stock and $400,000 retained earnings. The book values of Sun’s assets and liabilities were equal to fair values. During 2016, Sun reported net income of $80,000 and declared $40,000 in dividends on December 31. Balance sheets for Pam and Sun at December 31, 2016, are as follows (in thousands):

 

Pam

Sun

Assets

 

 

Cash

$ 168          

$ 80          

Receivables—net

200          

520          

Inventories

1,400          

200          

Land

600          

800          

Equipment—net

2,400          

400          

Investment in Sun

1,836          

            

 

$6,604          

$2,000          

Equities

 

 

Accounts payable

$1,640          

$ 320          

Dividends payable

240          

40          

Capital stock

4,000          

1,200          

Retained earnings

724          

440          

 

$6,604          

$2,000          

Required

Prepare consolidated balance sheet workpapers for Pam Corporation and Subsidiary for December 31, 2016.

check_circle

Expert Answer

Step 1

Consolidated balance sheet is referred to a financial statement which is prepared by taking the balances of parent company and subsidiary company. It is prepared for the shareholders of the company. No adjustments of these are made in the books of accounts.

Step 2

The consolidated balance sheet is prepared as follows:

help_outline

Image Transcriptionclose

P corporation & subsidiary Consolidated balance sheet December 31, 2016 S corporation (S) Adjustments & eliminations (S)balance sheet Particulars P corporation (S) Consolidated ($) 80 520 200 Cash 168 248 Receivables-net 200 1,400 600 36 684 Inventories 1,600 1,400 2,800 Land Equipment-net 2,400 Investment in S 1,836 Goodwill Total assets Accounts payable Dividend 800 400 1,836 400 0 400 2,000 320 6,604 1,640 7,132 1,960 36 240 40 244 payable Capital stock Retained earnings Non-controlling 4,000 724 1,200 440 1,200 440 4,000 724 204 204 interest Total equities 6,604 2,000 7,132

fullscreen
Step 3

Working notes:

  • The figures in the solution are in thousands.
  • Since P corporation has 90% stake in S corporation therefore, non-controlling interest will be 10%.
  • The amount of di...
help_outline

Image Transcriptionclose

Dividend eliminated = dividend amount x parent company's share = $40 x 90% $36

fullscreen

Want to see the full answer?

See Solution

Check out a sample Q&A here.

Want to see this answer and more?

Solutions are written by subject experts who are available 24/7. Questions are typically answered within 1 hour.*

See Solution
*Response times may vary by subject and question.
Tagged in

Business

Accounting

Related Accounting Q&A

Find answers to questions asked by student like you
Show more Q&A
add
question_answer

Q: Stevens Corporation manufactures a single product. The standard cost per unit of product is shown be...

A: Total overhead variance is calculated by subtracting the applied overhead from the actual overhead. ...

question_answer

Q: I need to know how to record this transaction in a general journal. Paid semi-monthly payroll, which...

A: Payroll expenses are the amount of expenses that an employer pays to the employees for the work that...

question_answer

Q: Accounting Question

A: Statement of cash flows:This statement reports all the cash transactions which are responsible for i...

question_answer

Q: What is deferred tax liability and deferred tax liability in accounting?

A: A deferred tax liability:A deferred tax liability is an income tax obligation that is due for the cu...

question_answer

Q: On March 3, Bridgeport Corp. sells $768,500 of its receivables to Western Factors Inc. Western Facto...

A: Prepare journal entry to record the sale of the receivables on Bridgeport Corp.’ books.

question_answer

Q: Sage Corporation purchased an asset at a cost of $54,000 on March 1, 2017. The asset has a useful li...

A: Tax depreciation for each year 2017–2022 is computed as below:

question_answer

Q: Presented below is net asset information related to the Salmon Division of Horton, Inc. SALMON DIVIS...

A: Calculate impairment loss amount: 

question_answer

Q: What is meant by Authorized and issued captial?

A: Meaning of Authorised capital  stock:Authorised stock refers to the maxinum number of preferred shar...

question_answer

Q: Diane's balance sheets as of December 31, 2016 and 2017 are presented below: 2016 310,000 300,000 0 ...

A: Indirect Method:The indirect method presents the statement of cash flows beginning with net income o...