Pop Corporation acquired a 75 percent interest in Son Corporation for $600,000 on January 1, 2016, when Son's equity consisted of $300,000 capital stock and $100,000 retained earnings. The fair values of Son's assets and liabilities were equal to book values on this date, and any goodwill is not amortized. Pop uses the equity method of accounting for its investment in Son. During 2016, Pop sold inventory items to Son for $160,000, and at December 31, 2016, Son's inventory included items on which there were $20,000 unrealized profits. During 2017, Pop sold inventory items to Son for $260,000, and at December 31, 2017, Son's inventory included items on which there were $40,000 unrealized profits. On December 31, 2017, Son owed Pop $30,000 on account for merchandise purchases. The financial statements of Pop and Son Corporations at and for the year ended December 31, 2017, are summarized as follows (in thousands):

REQUIRED:
Prepare consolidation workpapers for Pop Corporation and Subsidiary for the year ended December 31, 2017.

Transcribed Image Text:

Pop Son Combined Income and Retained Earnings Statements for the Year Ended December 31, 2017 Sales Income from Son Cost of sales Operating expenses $ 1,200 205 (540) (290) $800 (80) Net income Beginning retained eamings Deduct: Dividends 180 (100) (300) Retained eamings December 31, 2017 Balance Sheet at December 31, 2017 $ 170 330 $ 60 200 Accounts receivable Dividends receivable Inventories 120 160 160 100 Buildings-net Equipment-net Investment in Son 770 Total assets Accounts payable Dividends payable Other liabilities Common stock, $10 par Retained earnings $ 450 140 310 $ 200 380 Total equities $2,440