Par Corporation acquired an 80 percent interest in Sip Corporation for $180,000 cash on January 1, 2011, when Sip had capital stock of $50,000 and retained earnings of $150,000. The excess of fair value over book value acquired is due to a patent, which is being amortized over five years. Sip purchased its 20 percent interest in Par at book value on January 2, 2011, for $100,000.
Financial statements for the year ended December 31, 2012, are summarized as follows:
| Par | Sip |
Combined Income and Retained Earnings Statement for the Year Ended December 31 | ||
Sales | $140,000 | $100,000 |
Income from Sip | 28,000 | — |
Dividend income | — | 4,000 |
Gain on sale of land | — | 3,000 |
Expenses | (80,000) | (60,000) |
Net income | 88,000 | 47,000 |
Add: Beginning retained earnings | 405,710 | 180,000 |
Deduct: Dividends | (16,000) | (20,000) |
Retained earnings December 31 | $477,710 | $207,000 |
Balance Sheet at December 31 | ||
Other assets | $448,000 | $157,000 |
Investment in Sip (80%) | 109,710 | — |
Investment in Par (20%) | — | 100,000 |
Total assets | $557,710 | $257,000 |
Capital stock | $ 80,000 | $ 50,000 |
Retained earnings | 477,710 | 207,000 |
Total equities | $557,710 | $257,000 |
ADDITIONAL INFORMATION
1. Par’s separate earnings and dividends for 2012 were $60,000 and $20,000, respectively. Sip’s separate earnings and dividends in 2012 were $40,000 and $20,000, respectively.
2. Sip sold land to an outside interest for $7,000 on January 3, 2012, that it purchased from Par on January 3, 2011, for $4,000. The land had originally cost Par $2,000.
REQUIRED: Prepare consolidation workpaper entries and a consolidation workpaper for Par Corporation and Subsidiary at December 31, 2012, using the conventional approach for the mutual holding.
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