Workpapers (year of acquisition, excess assigned to inventory, equipment ancf patents, int...

Workpapers (year of acquisition, excess assigned to inventory, equipment ancf patents, intercompany transactions)

Pas Corporation acquired 80 percent of Sel Corporation’s common stock on January 1, 2011, for $210,000 cash. The stockholders’ equity of Sel at this time consisted of $150,000 capital stock and $50,000 retained earnings. The difference between the fair value of Sel and the underlying equity acquired in Sel was due to a $12,500 undervaluation of Sel’s inventory, a $25,000 undervaluation of Sel’s equipment, and unrecorded patents with a 20-year life.

The undervalued inventory items were sold by Sel during 2011, and the undervalued equipment had a remaining useful life of five years. Straight-line depreciation is used.

Sel owed Pas $4,000 on accounts payable at December 31, 2011.

The separate financial statements of Pas and Sel Corporations at and for the year ended December 31, 2011, are as follows (in thousands):

REQUIRED: Prepare consolidation workpapers for Pas Corporation and Subsidiary at and for the year ended December 31, 2011.