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P 4-12 Workpapers (two years after acquisition, fair value/book differentials, adjustments) Pat Corporation acquired an 80 percent interest in Sci Corporation for $480,000 on January 1, 2011, when Sci's stockholders' equity consisted of $400,000 capital stock and $50,000 retained earnings. The excess fair value over book value acquired was assigned to plant assets that were undervalued by $100,000 and to goodwill. The undervalued plant assets had a four-year useful life. ADDITIONAL INFORMATION 1. Pat's account receivable includes $10,000 owed by Sci. 2. Sci mailed its check for $40,000 to Pat on December 30, 2012, in settlement of the advance. 3. A $20,000 dividend was declared by Sci on December 30, 2012, but was not recorded by Pat. 4. Financial statements for Pat and Sci Corporations for 2012 follow (in thousands): Pat Sci $1,800 76 (1,200) (380) 296 244 (200) $ 340 $600 (300) (180) 120 100 (40) $180 Statements of Income and Retained Earnings for the Year Ended December 31 Sales Income from Sci Cost of sales Operating expenses Net Income Add: Retained earnings January 1 Less: Dividends Retained earnings December 31 Balance Sheet at December 31 Cash Accounts receivable-net Inventories Advance to Sci Other current assets Land Plant assets-net Investment in Sci Total assets $ 30 40 120 $ 12 52 164 40 160 320 680 560 $1,988 10 60 460 $720 136 CHAPTER 4 Pat Sci $ 48 Accounts payable Dividends payable Other liabilities Capital stock Retained earnings Total liabilities and stockholders' equity 200 1,400 340 $1,988 $ 30 20 90 400 180 $720 REQUIRED: Prepare consolidation workpapers for Pat Corporation and Subsidiary for 2012. Consolidated Statements NAME HERE PAT CORPORATION AND SUBSIDIARY P 4-12 CONSOLIDATION WORKING PAPERS FOR YEAR ENDED DECEMBER 31, 2012 80% | Adjustments & Eliminations (in thousands) Pat Sci Debits Credits INCOME STATEMENT Sales 1,800 600 Income from Sci 76 Cost of sales (1,200) (300) Operating expenses (380) (180) 2.400 76 (1,500) (560) 416 296 120 416 Consolidated NI Noncontrolling interest share Controlling share of NI RETAINED EARNINGS Retained earnings--Pat Retained earnings--Sci Controlling share of NI Dividends 244 244 100 416 100 120 (40) 296 (200) (240) 520 340 180 Retained earnings 12/31 BALANCE SHEET Cash Receivables-net Advance to Sci Inventories Other current assets Land Plant assets--net Investment in Sci 12 52 40 30 40 164 42 92 40 284 170 380 1,140 560 160 120 10 60 460 320 680 560 1.988 48 Dividends receivable Goodwill Total assets Accounts payable Dividends payable Other liabilities Capital stock Retained earings Total equities Noncontrolling interest 0 2,708 78 20 290 1,800 520 720 30 20 90 400 180 720 200 1 1,400 340 1,988 0 2,708