Problem

Pan Corporation acquired a 75 percent interest in Saf Corporation on January 1, 2011. Fina...

Pan Corporation acquired a 75 percent interest in Saf Corporation on January 1, 2011. Financial statements of Pan and Saf Corporations for the year 2011 are as follows (in thousands):

 

Pan

Saf

Combined Income and Retained Earnings Statements for the Year Ended December 31

Sales

$800

$200

Income from Saf

27.6

Cost of sales

(500)

(100)

Other expenses

(194)

(52)

Net income

133.6

48

Add: Retained earnings January 1

360

68

Deduct: Dividends

(100)

(32)

Retained earnings December 31

$393.6

$ 84

Balance Sheet at December 31

Cash

$ 106

$ 30

Accounts receivable—net

172

40

Dividends receivable from Saf

12

Inventories

190

20

Note receivable from Pan

10

Land

130

60

Buildings—net

340

160

Equipment—net

260

100

Investment in Saf

363.6

Total assets

$1,573.6

$420

Accounts payable

$ 170

$ 20

Note payable to Saf

10

Dividends payable

16

Capital stock, $10 par

1,000

300

Retained earnings

393.6

84

Total equities

$1,573.6

$420

REQUIRED : Prepare consolidation workpapers for Pan Corporation and Subsidiary for the year ended December 31, 2011. Only the information provided in the financial statements is available; accordingly, your solution will require some standard assumptions. Saf owned unrecorded patents having a fair value of $112,000, and a useful life of 10 years.

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