Pam Corporation paid $1,155,000 cash for a 70 percent interest in Sun Corporation's outstanding common stock on January 2, 2016, when the equity of Sun consisted of $1,000,000 common stock and $600,000 retained earnings. The excess fair value is due to goodwill.
In December 2016, Sun sold inventory items to Pam at a gross profit of $100,000 (selling price
$240,000 and cost $140,000), and all these items were included in Pam's inventory at December 31, 2016. Sun paid dividends of $100,000 in 2016, and an 80 percent dividends-received deduction applies. A flat 34 percent income tax rate applies to both companies. Separate pretax incomes of Pam and Sun for 2016 are as follows (in thousands):

REQUIRED:
1. Determine 2016 income tax currently payable and income tax expense for Pam and Sun.
2. Calculate Pam's income from Sun for 2016.
3. Prepare a consolidated income statement for Pam and Sun for 2016.

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Sales Cost of sales Operating expenses 3,000) (500 Pam $8,000 (4,000) S 1,000 Sun $2,000 (1,100) Pretax income $ 400