Workpapers (constructive retirement of bonds, intercompany sales)

Financial statements for Par Corporation and its 75 percent-owned subsidiary, Sal Corporation, for 2012 are summarized as follows (in thousands):

Â	Par	Sal
Combined Income and Retained Earnings Statement for	Â	Â
the Year Ended December 31, 2012	Â	Â
Sales	$630	$500
Gain on plant	30	—
Income from Sal	52	—
Cost of goods sold	(350)	(300)
Depreciation expense	(76)	(40)
Interest expense	(20)	—
Other expenses	(46 )	(60 )
Net income	220	100
Add: Beginning retained earnings	150	100
Deduct: Dividends	(160 )	(80 )
Retained earnings December 31	$210	$120
Balance Sheet at December 31, 2012	Â	Â
Cash	$ 27	$ 81
Bond interest receivable	—	5
Other receivables—net	40	30
Inventories	80	50
Land	90	70
Buildings—net	150	180
Equipment—net	140	90
Investment in Sal	343	—
Investment in Par bonds	—	94
Total assets	$870	$600
Accounts payable	$ 50	$ 80
Bond interest payable	10	—
10% bonds payable	200	—
Common stock	400	400
Retained earnings	210	120
Total equities	$870	$600

Par Corporation acquired its interest in Sal at book value during 2009, when the fair values of Sal’s assets and liabilities were equal to recorded book values.

ADDITIONAL INFORMATION

1. Par uses the equity method for its investment in Sal.

2. Intercompany sales of merchandise between the two affiliates totalled $50,000 during 2012. All intercompany balances have been paid except for $10,000 in transit from Sal to Par at December 31, 2012.

3. Unrealized profits in Sal’s inventories of merchandise acquired from Par were $12,000 at December 31, 2011, and $15,000 at December 31, 2012.

4. Sal sold equipment with a six-year remaining useful life to Par on January 2, 2010, at a gain of $24,000. The equipment is still in use by Par.

5. Par sold a plant to Sal on July 1, 2012. The land was sold at a gain of $10,000 and the building, which had a remaining useful life of 10 years, at a gain of $20,000.

6. Sal purchased $100,000 par of Par 10 percent bonds in the open market for $94,000 plus $5,000 accrued interest on December 31, 2012. Interest is paid semiannually on January 1 and July 1, and the bonds mature on January 1, 2017.

Required: Prepare a consolidation workpaper for Par Corporation and Subsidiary for the year ended

December 31, 2012.