Financial statements for Pad Corporation and its 75 percent-owned subsidiary, Sum Corporation, for 2011 are summarized as follows (in thousands):

Pad acquired its interest in Sum at book value during 2008, when the fair values of Sum's assets and liabilities were equal to their recorded book values.ADDITIONAL INFORMATION1. Pad uses the equity method for its investment in Sum.2. Intercompany merchandise sales totalled $100,000 during 2011. All intercompany balances have been paid except for $20,000 in transit at December 31, 2011.3. Unrealized profits in Sum's inventory of merchandise purchased from Pad were $24,000 on December 31, 2010, and $30,000 on December 31, 2011.4. Sum sold equipment with a six-year remaining life to Pad on January 3, 2009, at a gain of $48,000. Pad still uses the equipment in its operations.5. Pad sold land to Sum on July 1, 2011, at a gain of $20,000.6. Pad sold a building to Sum on July 1, 2011, at a gain of $40,000. The building has a 10-year remaining life and is still used by Sum.7. Sum purchased $200,000 par value of Pad's 10 percent bonds in the open market for $188,000 plus $10,000 accrued interest on December 31, 2011. Interest is paid semiannually on January 1 and July 1. The bonds mature on December 31, 2016.REQUIRED: Prepare consolidation workpapers for Pad Corporation and Subsidiary for the year ended December 31,2011.

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Pad Sum Combined Income and Retained Earnings Statement for the Year Ended December 31, 201I Sales S1,260 S1,000 Gain on land 20 Gain on building Income from Sum Cost of goods sold Depreciation expense Interest expense Other expenses Net income 40 104 (700) (152) (40) (92) 440 (600) (80) (120) 200 Add: Retained earnings, January 1 Deduct: Dividends Retained earnings, December 31 300 200 (320) $ 420 (160) 240 Pad Sum Balance Sheet at December 31, 201! $ 54 $ 162 Cash Bond interest receivable Other receivables-net 10 80 60 Inventories Land 160 180 100 140 Buildings-net Equipment-net Investment in Sum 300 360 280 180 686 Investment in Pad Bonds 188 $1,740 Total assets $1.200 S 100 20 $ 160 Accounts payable Bond interest payable 10% bonds payable Common stock Retained earnings Total equities 400 800 800 420 240 $1,740 $1,200