Pam Corporation purchased a 90 percent interest in Sun Corporation on December 31, 2015, for$2,700,000 cash, when Sun had capital stock of $2,000,000 and retained earnings of $500,000. All Sun’sassets and liabilities were recorded at fair values when Pam acquired its interest. The excess of fair valueover book value is due to previously unrecorded patents and is being amortized over a 10-year period.The Pam–Sun affiliation is a vertically integrated merchandising operation, with Sun selling allof its output to Pam Corporation at 140 percent of its cost. Pam sells the merchandise acquired fromSun at 150 percent of its purchase price from Sun. All of Pam’s December 31, 2016, and December31, 2017, inventories of $280,000 and $420,000, respectively, were acquired from Sun. Sun’sDecember 31, 2016, and December 31, 2017, inventories were $800,000 each.Pam’s accounts payable at December 31, 2017, includes $100,000 owed to Sun from 2017purchases.Comparative financial statements for Pam and Sun Corporations at and for the year endedDecember 31, 2017, are as follows (in thousands):Pam SunCombined Income and Retained Earnings Statement forthe Year Ended December 31, 2017Sales $8,190 $5,600Income from Sun 819 —Cost of sales (5,460) (4,000)Other expenses (1,544) (600)Net income 2,005 1,000Add: Beginning retained earnings 1,200 700Deduct: Dividends (1,000) (500)Retained earnings December 31, 2017 $2,205 $1,200Balance Sheet at December 31, 2017Cash $ 753 $ 500Inventory 420 800Other current assets 600 200Plant assets—net 3,000 3,000Investment in Sun 3,132 —Total assets $7,905 $4,500Current liabilities $1,700 $1,300Capital stock 4,000 2,000Retained earnings 2,205 1,200Total equities $7,905 $4,500r e Q U I r e D :Prepare consolidation workpapers for Pam Corporation and Subsidiary for the year endedDecember 31, 2017.