Pop Corporation acquired all the stock of Son Corporation on January 1, 2016, for $280,000 cash, when the book values and fair values of Son's assets and liabilities were as follows (in thousands):

Son's buildings have a remaining life of 10 years, and the equipment has a useful life of 2 years from the date of the combination. During 2016, Son had income of $50,000 and paid dividends of $20,000. Pop and Son are subject to a 35 percent tax rate.
REQUIRED:
1. Prepare a schedule to allocate the excess fair value over book value to Son's assets, liabilities, deferred taxes, and goodwill at January 1, 2016, assuming the purchase was a taxable transaction.
2. Prepare a schedule to allocate the excess fair value over book value to Son's assets, liabilities, deferred taxes, and goodwill at January 1, 2016, assuming the purchase was a tax-free reorganization.
3. Compute Pop's income from Son for 2016 under both options.

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Book Values (Tax Bases) Current assets Land Buildings-net Equipment-net $100 20 80 Fair Values $100 110 5 70 Total Assets Liabilities Capital stock Retained earnings $260 $ 90 150 20 $260 $90 Total Equities