Lat18
Pan Corporation acquired a controlling interest in Saf Corporation on January 1, 20X2.
Financial statements of Pan and Saf corporations for the year 20X2 are as follows :
Pan
Saf
$400,000
$100,000
Combined Income and Retained Earnings Statements
for the Year Ended December 31, 20X2
Sales
Income from Saf
Cost of sales
17,000
-
(250,000)
(50,000)
(97,000)
(26,000)
70,000
24,000
Add : Retained earnings January 1, 20X2
180,000
34,000
Deduct : Dividends
(50,000)
(16,000)
$200,000
$ 42,000
$ 61,000
$ 15,000
80,000
20,000
Other expenses
Net income
Retained earnings December 31, 20X2
Balance Sheet at December 31, 20X2
Cash
Accounts receivable-net
Dividends receivable from Saf
Inventories
Note receivable from Pan
Land
6,000
95,000
-
10,000
5,000
65,000
30,000
Buildings-net
170,000
80,000
Equipment-net
130,000
50,000
Investment in Saf
183,000
-
$790,000
$210,000
$ 85,000
$ 10,000
Total assets
Accounts payable
Note payable to Saf
Dividends payable
Capital stock, $10 par
5,000
500,000
8,000
150,000
Retained earnings
Total equities
200,000
42,000
$790,000
$210,000
Required : Prepare consolidation working papers for Pan Corporation and Subsidiary for
the year ended December 31, 20X2. Only the information provided in the financial
statements is available, and accordingly, your solution will require some standard
assumptions. (Hint : Determine Pan’s interest in Saf as a first step.)