Pam Corporation paid $175,000 for a 70 percent interest in Sun Corporation's outstanding stock on April 1, 2016. Sun's stockholders' equity on January 1, 2016, consisted of $200,000 capital stock and $50,000 retained earnings.

Accounts and balances at and for the year ended December 31, 2016, follow (in thousands):

ADDITIONAL INFORMATION
1. Sun Corporation paid $102,850 for all of Pam's outstanding bonds on July 1, 2016. These bonds were issued on January 1, 2016, bear interest at 12 percent, have interest payment dates of July 1 and January 1, and mature 10 years from the date of issue. The $6,000 premium on the issue is being amortized under the straight-line method.
2. Other current liabilities of Sun Corporation on December 31, 2016, include $10,000 dividends declared on December 15 and unpaid at year-end. Sun also declared $10,000 dividends on March 15, 2016.
3. Pam Corporation sold equipment to Sun on July 1, 2016, for $30,000. This equipment was purchased by Pam on July 1, 2013, for $36,000 and is being depreciated over a six-year period using the straight-line method (no salvage value). Sun still owns the equipment.
4. Sun sold land that cost $8,000 to Pam for $10,000 on October 15, 2016. Pam still owns the land.
5. Pam uses the equity method for its 70 percent interest in Sun.
REQUIRED:
Prepare a consolidation workpaper for the year ended December 31, 2016.

Transcribed Image Text:

Pam Sun Combined Income and Retained Earnings Statement for the Year Ended December 3I Sales Income from Sun Gain Interest income Expenses (includes cost of goods sold) Interest expense $287.1 12 (200) $150 12.3 5.85 (117.85) 100 250 (50) $300 Net income Add: Beginning retained earnings Less: Dividends 40 50 (20) Retained earnings December 31 Balance Sheet at December 31 Cash Interest receivable Inventories Other current assets Plant assets-net Investment in Sun common Investment in Pam bonds $ 70 $ 17 140 110 502.7 180.3 6 60 20 107.3 102.7 Total assets $950 $300 Pam Sun Interest payable Other current liabilities 12% bonds payable Common stock Retained earnings 38.6 105.4 500 300 30 200 70 $300 Total equities $950