Name General instruction for Question I and Question 2: Use only the C-E-A-D-I approach to complete the consolidation worksheet. Other approaches will not be accepted for this assignment. Question 1 Pam Corporation acquired a 70 percent interest in Sun Corporation's outstanding voting common stock on January 1, 2016, for $980,000 cash. The stockholders' equity (book value) of Sun on this date consisted of $1,000,000 capital stock and S200,000 retained earnings. The differences between the fair value of Sun and the book value of Sun were assigned $10,000 to Sun's undervalued inventory, $28,000 to under-valued buildings, S42,000 to undervalued equipment, and $80,000 to previously unrecorded trademarks. Any remaining excess is goodwill. The undervalued inventory items were sold during 2016, and the undervalued buildings and equipment had remaining useful lives of seven years and three years, respectively. The trademarks have a 40-year life. Depreciation is computed using the straight-line method. At December 31, 2016, Sun's accounts payable include S20,000 owed to Pam. This S20.000 account payable is due on January 15, 2017. Separate financial statements for Pam and Sun for 2016 are summarized as follows (in thousands): Pam Sun Sales $1.600 $1,400 Income from Sun 119 Cost of sales (600) (800) Depreciation expense (308) (120) Other expenses 320) (280) Net income $491 200 Add: Retained earnings January 1 600 200 Deduct: Dividends (400) (100) Retained earnings December 31 S 691 S 300 Cash $ 120 Accounts receivable-net 140 Dividends receivable 28 Inventories 300 200 Other current assets 140 60 Land 100 200 Buildings-net 280 Equipment-net 1.140 660 Investment in Sun 1,029 Total assets $3,389 $1,700 Accounts payable S 400 $ 170 Dividends payable 200 40 Other liabilities 190 Capital stock, $20 par 2,000 1.000 Retained earnings 300 Total equities $3,389 S1,700 Required: S 172 200 320 98 691 1. Prepare consolidated workpapers for Pam Corporation and Subsidiary for the year ended December 31, 2016. Please provide your answer for this requirement on page 2 2. Show all of the C-E-A-D-I eliminating entries that were made during the consolidation process for 2016 in a general journal entry format. Pam Corporation uses the full equity method to account for its investments. Please provide your answer for this requirement on page 3. Question 1 Consolidation statements worksheet Pam Company and Subsidiary For the year ended December 31, 2016 Consolidate Eliminations Debit Credit Pam $1,600 (600) $1.000 119 (308) $1,400 (800) S600 (120) (320) S491 (280) $200 Income statement: Sales Cost of goods sold Gross profit Equity income Depreciation expense Amortization expense Other expenses Net income (P/S only net income) Consolidated net income NCI-Income Consolidated NI - Controlling interests Statement of RE: Retained eamings. 1/1 Net income Dividends Retained earnings, 12/31 Balance sheet: Cash Accounts receivable-net Dividends receivable Inventories Other current assets Land Building-net Equipment-net Trademark Goodwill Equity investment $600 491 (400) S 691 200 (100) $ 300 S120 140 S172 200 28 300 140 100 280 1,140 200 200 60 200 320 660 1,029 $ 3.389 S1,700 $ 400 200 Total Assets Liabilities Accounts payable Dividend payable Other current liabilities Capital stock, S20 par Retained earnings NCI $ 170 40 190 1.000 300 2.000 691 21000 Total liabilities and stockholders' equity $ 3,389 S1.700 Name General instruction for Question I and Question 2: Use only the C-E-A-D-I approach to complete the consolidation worksheet. Other approaches will not be accepted for this assignment. Question 1 Pam Corporation acquired a 70 percent interest in Sun Corporation's outstanding voting common stock on January 1, 2016, for $980,000 cash. The stockholders' equity (book value) of Sun on this date consisted of $1,000,000 capital stock and S200,000 retained earnings. The differences between the fair value of Sun and the book value of Sun were assigned $10,000 to Sun's undervalued inventory, $28,000 to under-valued buildings, S42,000 to undervalued equipment, and $80,000 to previously unrecorded trademarks. Any remaining excess is goodwill. The undervalued inventory items were sold during 2016, and the undervalued buildings and equipment had remaining useful lives of seven years and three years, respectively. The trademarks have a 40-year life. Depreciation is computed using the straight-line method. At December 31, 2016, Sun's accounts payable include S20,000 owed to Pam. This S20.000 account payable is due on January 15, 2017. Separate financial statements for Pam and Sun for 2016 are summarized as follows (in thousands): Pam Sun Sales $1.600 $1,400 Income from Sun 119 Cost of sales (600) (800) Depreciation expense (308) (120) Other expenses 320) (280) Net income $491 200 Add: Retained earnings January 1 600 200 Deduct: Dividends (400) (100) Retained earnings December 31 S 691 S 300 Cash $ 120 Accounts receivable-net 140 Dividends receivable 28 Inventories 300 200 Other current assets 140 60 Land 100 200 Buildings-net 280 Equipment-net 1.140 660 Investment in Sun 1,029 Total assets $3,389 $1,700 Accounts payable S 400 $ 170 Dividends payable 200 40 Other liabilities 190 Capital stock, $20 par 2,000 1.000 Retained earnings 300 Total equities $3,389 S1,700 Required: S 172 200 320 98 691 1. Prepare consolidated workpapers for Pam Corporation and Subsidiary for the year ended December 31, 2016. Please provide your answer for this requirement on page 2 2. Show all of the C-E-A-D-I eliminating entries that were made during the consolidation process for 2016 in a general journal entry format. Pam Corporation uses the full equity method to account for its investments. Please provide your answer for this requirement on page 3. Question 1 Consolidation statements worksheet Pam Company and Subsidiary For the year ended December 31, 2016 Consolidate Eliminations Debit Credit Pam $1,600 (600) $1.000 119 (308) $1,400 (800) S600 (120) (320) S491 (280) $200 Income statement: Sales Cost of goods sold Gross profit Equity income Depreciation expense Amortization expense Other expenses Net income (P/S only net income) Consolidated net income NCI-Income Consolidated NI - Controlling interests Statement of RE: Retained eamings. 1/1 Net income Dividends Retained earnings, 12/31 Balance sheet: Cash Accounts receivable-net Dividends receivable Inventories Other current assets Land Building-net Equipment-net Trademark Goodwill Equity investment $600 491 (400) S 691 200 (100) $ 300 S120 140 S172 200 28 300 140 100 280 1,140 200 200 60 200 320 660 1,029 $ 3.389 S1,700 $ 400 200 Total Assets Liabilities Accounts payable Dividend payable Other current liabilities Capital stock, S20 par Retained earnings NCI $ 170 40 190 1.000 300 2.000 691 21000 Total liabilities and stockholders' equity $ 3,389 S1.700