Consolidated income statement (upstream sales)
Pap Corporation purchased an 80 percent interest in Sak Corporation for $1,200,000 on January 1, 2012, at which time Sak’s stockholders’ equity consisted of $1,000,000 common stock and $400,000 retained earnings. The excess fair value over book value was goodwill. Comparative income statements for the two corporations for 2013 are as follows:
|
Pap |
Sak |
|
|
Sales |
$2,000 |
$1,000 |
|
Income from Sak |
224 |
— |
|
Cost of sales |
(800) |
(500) |
|
Depreciation expense |
(260) |
(80) |
|
Other expenses |
(180 ) |
(120 ) |
|
Net income |
$ 984 |
$ 300 |
Dividends of Pap and Sak for all of 2013 were $600,000 and $200,000, respectively. During 2012 Sak sold inventory items to Pap for $160,000. This merchandise cost Sak $100,000, and one third of it remained in Pap’s December 31, 2012, inventory. During 2013 Sak’s sales to Pap were $180,000. This merchandise cost Sak $120,000, and one half of it remained in Pap’s December 31, 2013, inventory.
REQUIRED: Prepare a consolidated income statement for Pap Corporation and Subsidiary for the year ended December 31, 2013.