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Consolidated working papers (downstream sales)
Pan Corporation acquired 100% of Sal Corporation's oustanding votiong common stock on Jan 1, 2009, for $660,000 cash. Sal's stockholders' equity on this date consisted on $300,000 capital stock and $300,000 retained earnings. The difference between the price paid by Pan Corporation and the underlying equity aquired in Sal Corporation was allocated $30,000 to Sal's undervalued inventory and the remainder to goodwill(which is not amortized). The undervalued inventory items were sold by Sal during 2009.
Pan made sales of $100,000 to Sal at a gross profit of $40,000 during 2009; during 2010, Pan made sales of $120,000 to Sal at a gross profit of $48,000. One-half the 2009 sales were invetoried by Sal at year-end 2009, and one-fourth of the 2010 sales were inventoried by Sal at year-end 2010. Sal owed Pan $17,000 on account at December 21, 2010.

The separate financial statements of Pan and Sal Corporations at and for the year ended December 31, 2010, are summarized as follows:

Combined Income and Retained Earning Statements
for the year ended December 31, 2010 (in thousands)

Sales
Pan:$800 Sal:$400

Income from Sal
Pan: $108 Sal:$-

Cost of Sales
Pan:$(400) Sal: $(200)

Depreciation Expense
Pan: $(110) Sal: $(40)

Other Expenses
Pan: $(192) Sal: $(60)

Net Income
Pan: $206 Sal: $100

Beginning Retained Earnings
Pan: $606 Sal: $380

Less: Dividends
Pan: $(100) Sal: $(50)

Retained Earnings December 31, 2010
Pan: $712 Sal: $430


Balance Sheet at December 31, 2010

Cash
Pan: $54 Sal: $37

Receivables-net
Pan: $90 Sal: $60

Inventories
Pan: $100 Sal: $80

Other Assets
Pan: $70 Sal: $90

Land
Pan: $50 Sal: $50

Buildings-net
Pan: $200 Sal: $150

Equipment-net
Pan: $500 Sal: $400

Investment in Sal
Pan: $748 Sal: $-

Total assets
Pan: $1,812 Sal: $867

Account Payable
Pan: $160 Sal: $47

Other Liabilities
Pan: $340 Sal: $90

Common Stock, $10 par
Pan: $600 Sal: $300

Retained Earnings
Pan: $712 Sal: $430

Total Equities
Pan: $1,812 Sal: $867


Requiered: Prepare working papers to consolidate the financial statements of Pan Corporation and Subsidiary at and for the year ended December 31, 2010

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