Solution P4-9

Pam Corporation and Subsidiary

Consolidation Workpapers
for the year ended December 31, 2016
(in thousands)
Adjustments and Consolidated
Pam 80% Sun Eliminations Statements
Income Statement
Sales $ 800 $ 440 $1,240
Income from Sun 68 a 68
Cost of sales 320* 160* b 50 530*
Depreciation expense 160* 80* d 20 260*
Other expenses 102* 40* g 5 147*
Consolidated NI $ 303
Noncontrolling share c 17 17*
Controlling share of NI $ 286 $ 160 $ 286

Retained Earnings
Retained earnings — Pam $ 300 $ 300
Retained earnings — Sun $ 200 b 200
Controlling share of NI 286 160 286
Dividends 160* 80* a 64
c 16 160*
Retained earnings – Dec 31 $ 426 $ 280 $ 426
4-2 Consolidation Techniques and Procedures

Balance Sheet
Cash $ 118 $ 120 $ 238
Trade receivables — net 112 160 e 16 256
Dividends receivable 32 f 32
Inventories 160 120 280
Land 60 120 180
Buildings — net 260 280 540
Equipment — net 800 400 b 100 d 20 1,280
Investment in Sun 844 a 4
b 840
Patents ______ _____ b 100 g 5.0 95
$2,386 $1,200 $2,869

Accounts payable $ 160 $ 200 e 16 $ 344

Dividends payable 400 40 f 32 408
Other liabilities 200 80 280
Capital stock 1,200 600 b 600 1,200
Retained earnings 426 280 426
$2,386 $1,200
Noncontrolling interest January 1 b 210
Noncontrolling interest December 31 ________ c 1 211
_
1,208 1,208 $2,869
*Deduct
Chapter 4 4-3

Solution P4-9 (continued)

Supporting computations
Investment cost January 1, 2016 $ 840,000
Implied fair value of Sun ($840,000 / 80%) $1,050,000
Book value of Sun 800,000
Excess fair value over book value $ 250,000
Excess allocated:
Undervalued inventory $ 50,000
Undervalued equipment 100,000
Remainder to patents 100,000
Excess fair value over book value $250,000
4-4 Consolidation Techniques and Procedures

Solution P4-10

Pop Corporation and Subsidiary

Consolidation Workpapers
for the year ended December 31, 2016
(in thousands)
80% Adjustments and Consolidated
Pop Son Eliminations Statements
Income Statement
Sales $ 400 $ 220 $ 620
Income from Son 36 a 36
Cost of sales 160* 80* b 25 265*
Depreciation expense 80* 40* d 10 130*
Other expenses 51* 20* 71*
Consolidated NI $ 154
Noncontrolling share _____ _____ c 9 9*
Controlling share of NI $ 145 $ 80 $ 145

Retained Earnings
Retained earnings — Pop $ 150 $ 150
Retained earnings — Son $ 100 b 100
Controlling share of NI 145 80 145
Dividends 80* 40* a 32
c 8 80*
Retained earnings – Dec 31 $ 215 $ 140 $ 215
Chapter 4 4-5

Balance Sheet
Cash $ 59 $ 60 $ 119
Trade receivables — net 56 80 e 8 128
Dividends receivable 16 f 16
Inventories 80 60 140
Land 30 60 90
Buildings — net 130 140 270
Equipment — net 400 200 b 50 d 10 640
Investment in Son 424 a 4
b 420
Goodwill ______ _____ b 50 50
$1,195 $ 600 $1,437

Accounts payable $ 80 $ 100 e 8 $ 172

Dividends payable 200 20 f 16 204
Other liabilities 100 40 140
Capital stock 600 300 b 300 600
Retained earnings 215 140 215
$1,195 $ 600

Noncontrolling interest January 1 b 105

Noncontrolling interest December 31 _______ c 1 106
_
604 604 $1,437
*Deduct
4-6 Consolidation Techniques and Procedures

Solution P4-10 (continued)

Supporting computations
Investment cost January 1, 2016 $420,000
Implied fair value of Son ($420,000 / 80%) $525,000
Book value of Son 400,000
Excess fair value over book value $125,000
Excess allocated:
Undervalued inventory $ 25,000
Undervalued equipment 50,000
Remainder to goodwill 50,000
Excess fair value over book value $125,000

Income from Son

Son’s reported net income $ 80,000
Less amortization of excess fair value:
Inventory (25,000)
Depreciation ($50,000 / 5 years) (10,000)
Son’s adjusted income $ 45,000

Pop’s 80% controlling share $ 36,000

20% Noncontrolling interest share $ 9,000