Pol Corporation purchased a 90 percent interest in San Corporation on December 31, 2010, for $2,700,000 cash, when San had capital stock of $2,000,000 and retained earnings of $500,000. All San's assets and liabilities were recorded at their fair values when Pol acquired its interest. The excess of fair value over book value is due to previously unrecorded patents and is being amortized over a 10-year period. The Pol???San affiliation is a vertically integrated merchandising operation, with San selling all of its output to Pol Corporation at 140 percent of its cost. Pol sells the merchandise acquired from San at 150 percent of its purchase price from San. All of Pol's December 31, 2011, and December 31, 2012, inventories of $280,000 and $420,000, respectively, were acquired from San. San's December 31, 2011, and December 31, 2012, inventories were $800,000 each. Pol's accounts payable at December 31, 2012, includes $100,000 owed to San from 2012 purchases. Comparative financial statements for Pol Corporation and San Corporation at and for the year ended December 31, 2012, are as follows (in thousands):

REQUIRED: Prepare consolidation workpapers for Pol Corporation and Subsidiary for the year ended December 31,2012.

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Pol San Combined Income and Retained Earnings Statement for the Year Ended December 31, 2012 Sales $5,600 S8,190 Income from San Cost of sales 819 (5,460) (4,000) (600) 1,000 Other expenses Net income Add: Beginning retained earnings Deduct: Dividends (1,544) 2,005 1,200 (1,000) 700 (500) Retained earnings December 31, 2012 $2,205 $1,200 Balance Sheet at December 31, 2012 Cash S 753 $ 500 Inventory Other current assets 420 600 800 200 3,000 Plant assets-net Investment in San 3.000 3.132 $7,905 Total assets $4.500 $1.300 Current liabilities $1,700 4,000 2.205 S7,905 Capital stock Retained earnings Total equities 2,000 1.200 $4,500