Prepare comparative consolidated financial statements for Pit Corporation and Subsidiary at and for…


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Comparative consolidated statements under alternative theories At December 31, 2011, when the fair values of Sam Corporation’s net assets were equal to their book values of $240,000, Pit Corporation acquired an 80 percent interest in Sam for $224,000. One year later, at December 31, 2012, the comparative adjusted trial balances of the two corporations appear as follows (in thousands): Pit Corporation Sam Corporation Cash $ 40.8 $ 70 Accounts receivable 90 30 Inventory 160 40 Land 200 80 Buildings 900 200 Investment in Sam 240 — Cost of sales 375 200 Expenses 150 50 Dividends 120 30 Total debits $2,275.8 $700 Accumulated depreciation $ 200 $ 60 Accounts payable 175.8 100 Capital stock 800 200 Retained earnings 360 40 Sales 700 300 Income from Sam 40 — Total credits $2,275.8 $700 ADDITIONAL INFORMATION: During 2012, Sam Corporation sold inventory items costing $15,000 to Pit for $23,000. Half of these inventory items remain unsold at December 31, 2012. REQUIRED: Prepare comparative consolidated financial statements for Pit Corporation and Subsidiary at and for the year ended December 31, 2012, under 1. Traditional theory 2. Parent-company theory 3. Entity theory

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