Pil Corporation paid $170,000 for an 80 percent interest in Stu Corporation on December 31, 2011, when Stu’s stockholders’ equity consisted of $100,000 capital stock and $50,000 retained earnings. A summary of the changes in Pil’s Investment in Stu account from December 31, 2011, to December 31, 2015, follows (in thousands):
Investment cost December 31, 2011 |
| $170 |
Increases |
|
|
80% of Stu’s net income 2012 through 2015 |
| 112 |
A |
| 282 |
Decreases |
|
|
80% of Stu’s dividends 2012 through 2015 | $56 |
|
80% of Amortization of excess fair value over book value: |
|
|
Assigned to inventories, $8,750 (sold in 2012) | 7 |
|
Assigned to plant assets, $22,500 (depreciated over a nine-year period) 2012 through 2015 | 8 |
|
Assigned to patents, $31,250 (amortized over a five-year period) 2012 through 2015 | 20 | 91 |
Investment balance December 31, 2015 |
| $191 |
Financial statements for Pil and Stu at and for the year ended December 31, 2015, are summarized as follows (in thousands):
| Pil | Stu |
Combined Income and Retained Earnings Statements for the Year Ended December 31 | ||
Sales | $300 | $200 |
Income from Stu | 25 | — |
Cost of sales | (180) | (140) |
Other expenses | (50) | (20) |
Net income | 95 | 40 |
Add: Retained earnings January 1 | 255 | 100 |
Deduct: Dividends | (50) | (20) |
Retained earnings December 31 | $300 | $120 |
Balance Sheet at December 31 | ||
Cash | $ 41 | $ 35 |
Trade receivables—net | 60 | 55 |
Dividends receivable | 8 | — |
Advance to Stu | 25 | — |
Inventories | 125 | 35 |
Plant assets—net | 300 | 175 |
Investment in Stu | 191 | — |
Total assets | $750 | $300 |
Accounts payable | $ 50 | $ 45 |
Dividends payable | — | 10 |
Advance from Pil | — | 25 |
Capital stock | 400 | 100 |
Retained earnings | 300 | 120 |
Total equities | $750 | $300 |
ADDITIONAL INFORMATION
1. The accounts payable of Stu at December 31, 2015, include $5,000 owed to Pil.
2. Pil advanced $25,000 to Stu during 2013. This advance is still outstanding.
3. Half of Stu’s 2015 dividends will be paid in January 2016.
REQUIRED : Prepare workpapers to consolidate the balance sheets only of Pil and Stu Corporations at December 31, 2015.
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