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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