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

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)

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

Pan: $54 Sal: $37

Pan: $90 Sal: $60

Pan: $100 Sal: $80

Other Assets
Pan: $70 Sal: $90

Pan: $50 Sal: $50

Pan: $200 Sal: $150

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

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