Consolidated balance sheet and income statement under entity theory
Par Corporation acquires an 80 percent interest in Sip Company on January 3, 2011, for $320,000. On this date Sip’s stockholders’ equity consists of $200,000 capital stock and $140,000 retained earnings. The fair value/book value differential is assigned to undervalued equipment with a 6 year remaining life. Immediately after acquisition, Sip sells equipment with a 10 year remaining useful life to Par at a gain of $10,000.
Adjusted trial balances of Par and Sip at December 31, 2011, are as follows (in thousands):
|
Par |
Sip |
|
|
Current assets |
$ 303.2 |
$180 |
|
Plant and equipment |
800 |
400 |
|
Investment in Sip |
336.8 |
— |
|
Cost of sales |
500 |
260 |
|
Depreciation |
100 |
50 |
|
Other expenses |
120 |
40 |
|
Dividends |
100 |
20 |
|
$2,260 |
$950 |
|
|
Accumulated depreciation |
$ 300 |
$100 |
|
Liabilities |
200 |
100 |
|
Capital stock |
600 |
200 |
|
Retained earnings |
327.2 |
140 |
|
Sales |
800 |
400 |
|
Gain on plant assets |
— |
10 |
|
Income from Sip |
32.8 |
— |
|
$2,260 |
$950 |
REQUIRED
1. Prepare a consolidated income statement for 2011 using entity theory.
2. Prepare a consolidated balance sheet at December 31, 2011, using entity theory.