Papal Corporation Acquired an 80% Interest in Sandman Corporation at a Cost

Essay

Papal Corporation acquired an 80% interest in Sandman Corporation at a cost equal to 80% of the book value of Sandman's net assets in 2010.At the time of the acquisition,the book values and fair values of Sandman's assets and liabilities were equal.During 2011,Papal recorded sales of $440,000 of merchandise to Sandman at a gross profit rate of 30%.Sandman's beginning and ending inventories for 2011 were $60,000 and $80,000,respectively.Income statement information for both companies for 2011 is as follows:
Required:
Prepare a consolidated income statement for Papal Corporation and Subsidiary for 2011.