accounting-Par Corporation acquired its 90 percent interest in Sam Corporation

QUESTION

Par Corporation acquired its 90 percent interest in Sam Corporation at tits book value of 3,600,000 on January 1, 2011, when Sam had capital stock of 3,000,000 and retained earnings of 1,000,000. The December 31, 2011 and 2012, inventories of Par included merchandise acquired from Sam of 300,000 and 400,000, respectively. Sam realizes a gross profit of 40 percent on all merchandise sold. During 2011 and 2012, sales by Sam to Par were 600,o00 and 800,000 respectively. Summary adjusted trial balances for Par and Sam at December 31, 2012, follow (in thousands)Par Cash 1000, Receivables net 2000,

ANSWER:

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