Consolidation workpaper second year (conventional approach)
Par Corporation acquired an 80 percent interest in Sip Corporation for $180,000 cash on January 1, 2011, when Sip had capital stock of $50,000 and retained earnings of $150,000. The excess of fair value over book value acquired is due to a patent, which is being amortized over five years. Sip purchased its 20 percent interest in Par at book value on January 2, 2011, for $100,000.
Financial statements for the year ended December 31, 2012, are summarized as follows:
|
Par |
Sip |
|
|
Combined Income and Retained Earnings Statement |
||
|
for the Year Ended December 31 |
||
|
Sales |
$140,000 |
$100,000 |
|
Income from Sip |
28,000 |
— |
|
Dividend income |
— |
4,000 |
|
Gain on sale of land |
— |
3,000 |
|
Expenses |
(80,000 ) |
(60,000 ) |
|
Net income |
88,000 |
47,000 |
|
Add: Beginning retained earnings |
405,710 |
180,000 |
|
Deduct: Dividends |
(16,000 ) |
(20,000 ) |
|
Retained earnings December 31 |
$477,710 |
$207,000 |
|
Balance Sheet at December 31 |
||
|
Other assets |
$448,000 |
$157,000 |
|
Investment in Sip (80%) |
109,710 |
— |
|
Investment in Par (20%) |
— |
100,000 |
|
Total assets |
$557,710 |
$257,000 |
|
Capital stock |
$ 80,000 |
$ 50,000 |
|
Retained earnings |
477,710 |
207,000 |
|
Total equities |
$557,710 |
$257,000 |
ADDITIONAL INFORMATION
1. Par’s separate earnings and dividends for 2012 were $60,000 and $20,000, respectively. Sip’s separate earnings and dividends in 2012 were $40,000 and $20,000, respectively.
2. Sip sold land to an outside interest for $7,000 on January 3, 2012, that it purchased from Par on January 3, 2011, for $4,000. The land had originally cost Par $2,000.
REQUIRED: Prepare consolidation workpaper entries and a consolidation workpaper for Par Corporation and Subsidiary at December 31, 2012, using the conventional approach for the mutual holding.