Problem

Financial statements for Pil and San Corporations for 2011 are as follows (in thousands):...

Financial statements for Pil and San Corporations for 2011 are as follows (in thousands):

 

Pil

San

Combined Income and Retained Earnings Statement for the Year Ended December 31, 2011

Sales

$210

$130

Income from San

31.9

Gain on sale of land

10

Depreciation expense

(40)

(30)

Other expenses

(110)

(60)

Net income

91.9

50

Add: Beginning retained earnings

140.4

50

Deduct: Dividends

(30)

Retained earnings December 31

$202.3

$100

Balance Sheet at December 31, 2011

Current assets

$200

$170

Plant assets

550

350

Accumulated depreciation

(120)

(70)

Investment in San

322.3

Total assets

$952.3

$450

Current liabilities

$150

$ 50

Capital stock

600

300

Retained earnings

202.3

100

Total equities

$952.3

$450

ADDITIONAL INFORMATION

1. Pil acquired an 80 percent interest in San on January 2, 2009, for $290,000, when San’s stockholders’ equity consisted of $300,000 capital stock and no retained earnings. The excess of investment fair value over book value of the net assets acquired related 50 percent to undervalued inventories (subsequently sold in 2009) and 50 percent to a patent with a 10-year amortization period.


2. San sold equipment to Pil for $25,000 on January 1, 2010, at which time the equipment had a book value of $10,000 and a five-year remaining useful life (included in plant assets in the financial statements).


3. During 2011, San sold land to Pil at a profit of $10,000 (included in plant assets in the financial statements).


4. Pil uses the equity method to accounting for its investment in San.

REQUIRED : Prepare a consolidation workpaper for Pil Corporation and Subsidiary for the year ended December 31, 2011.

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