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.