Pam Corporation acquired a 70 percent interest in Sam Corporation on January 1, 2011, for $420,000 cash,


Pam Corporation acquired a 70 percent interest in Sam Corporation on January 1, 2011, for $420,000 cash, when Sam's equity of Sam consisted of $300,000 capital stock and $200,000 retained earnings. On July 1, 2012, Pam acquired an additional 10 percent interest in Sam for $67,500, to bring its interest in Sam to 80 percent. The financial statements of Pam and Sam Corporations at and for the year ended December 31, 2012, are as follows (in thousands):


1. The fair value/book value differential from Pam's two purchases of Sam was goodwill.

2. Pam Corporation sold inventory items to Sam during 2011 for $60,000, at a gross profit of $10,000. During 2012, Pam's sales to Sam were $48,000, at a gross profit of $8,000. Half of the 2011 intercompany sales were inventoried by Sam at year-end 2011, and three-fourths of the 2012 sales remained unsold by Sam at year-end 2012. Sam owes Pam $25,000 from 2012 purchases.

3. At year-end 2011, Sam purchased land from Pam for $20,000. The cost of this land to Pam was $12,000.

4. Pam sold machinery with a book value of $40,000 to Sam for $80,000 on July 8, 2012. The machinery had a five-year useful life at that time. Sam uses straight-line depreciation without considering salvage value on the machinery.

5. Pam uses a one-line consolidation in accounting for Sam. Both Pam and Sam Corporations declared dividends for 2012 in equal amounts in June and December.

REQUIRED: Prepare a workpaper to consolidate the financial statements of Pam Corporation and Subsidiary for the year ended December 31,2012.

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Advanced Accounting

ISBN: 9780132568968

11th Edition

Authors: Floyd A. Beams, Joseph H. Anthony, Bruce Bettinghaus, Kenneth Smith

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