Pam Corporation acquires an 80 percent interest in Sun Company on January 3, 2016, for $640,000. On this date Sun's stockholders' equity consists of $400,000 capital stock and $280,000 retained earnings.
The fair value/book value differential is assigned to undervalued equipment with a 6-year remaining life. Immediately after acquisition, Sun sells equipment with a 10-year remaining useful life to Pam at a gain of $20,000.
Adjusted trial balances of Pam and Sun at December 31, 2016, are as follows (in thousands):

REQUIRED
1. Prepare a consolidated income statement for 2016 using entity theory.
2. Prepare a consolidated balance sheet at December 31, 2016, using entity theory.

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Pam Sun $ 606.4 1,600 Current assets Plant and equipment Investment in Sun Cost of sales Depreciation Other expenses Dividends $ 360 800 673.6 1,000 200 240 200 520 100 80 40 $1,900 $4,520 $ 600 400 1,200 Accumulated depreciation Liabilities Capital stock Retained earnings Sales Gain on plant assets Income from Sun $200 200 400 280 800 20 654.4 1,600 65.6 $4,520 $1,900