Workpapers (year of acquisition, fair value/book value differentials, intercompany balance...

Workpapers (year of acquisition, fair value/book value differentials, intercompany balances)

Pik 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 goodwill.

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 Pik $4,000 on accounts payable at December 31, 2011.

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

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