Workpapers and financial statements
Question
Workpapers and financial statements in year of acquisition
Peterson Corporation acquired 70 percent of the outstanding voting stock of Smith Corporation for $91,000 cash
on January 1, 2011, when Smith’s stockholders’ equity was $130,000. All the assets and liabilities of Smith were
stated at fair values (equal to book values) when Peterson acquired its 70 percent interest. Financial statements
of the two corporations at and for the year ended December 31, 2011, are summarized as follows (in thousands):
Combined Income and Retained Earnings
Statements for the Year Ended December 31
Peterson Smith
Sales $620 $200
Income from Smith 21 0
Cost of Goods Sold -400 -130
Operating expenses -154 -40
Net income $87 $30
Add: Retained earnings January 1 130 22
Deduct: Dividends -60 -20
USA 
India