Par Corporation acquired an 80 percent interest in Sin Corporation on January 1, 2011, for $108,000 cash, when Sin’s capital stock was $100,000 and retained earnings were $10,000. The difference between investment fair value and book value acquired is due to a patent being amortized over a 10-year period.
Separate financial statements for Par and Sin on December 31, 2014, are summarized as follows (in thousands):
| Par | Sin |
Combined Income and Retained Earnings Statement for the Year Ended December 31, 2014 | ||
Sales | $650 | $120 |
Income from Sin | 42 | — |
Cost of sales | (390) | (40) |
Other expenses | (170) | (30) |
Net income | 132 | 50 |
Add: Beginning retained earnings | 95.6 | 20 |
Deduct: Dividends | (70) | (20) |
Retained earnings December 31 | $157.6 | $ 50 |
Balance Sheet at December 31, 2014 | ||
Cash | $ 58 | $ 20 |
Accounts receivable | 40 | 20 |
Inventories | 60 | 35 |
Plant assets | 290 | 205 |
Accumulated depreciation | (70) | (100) |
Investment in Sin | 121.6 | — |
Total assets | $499.6 | $180 |
Accounts payable | $ 42 | $ 30 |
Capital stock | 300 | 100 |
Retained earnings | 157.6 | 50 |
Total equities | $499.6 | $180 |
ADDITIONAL INFORMATION
1. Sin’s sales include intercompany sales of $8,000, and Par’s December 31, 2014, inventory includes $1,000 profit on goods acquired from Sin. Par’s December 31, 2013, inventory contained $2,000 profit on goods acquired from Sin.
2. Par owes Sin $4,000 on account.
3. On January 1, 2013, Sin sold plant assets to Par for $60,000. These assets had a book value of $40,000 on that date and are being depreciated by Par over five years.
4. Park uses the equity method to account for its investment in Sin.
REQUIRED: Prepare a consolidation workpaper for Par Corporation and Subsidiary for 2014.
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