P4-8 Workpapers (excess due to undervalued land and goodwill)

Separate-company financial statements for Pop Corporation and its subsidiary, Son Company, at and for the year ended December 31, 2017, are summarized as follows (in thousands):

Pop Son Combined Income and Retained Earnings Statement for the Year Ended December 31 Sales $400 $100 Income from Son 21.6 —

Cost of sales (250) (50)

Expenses (100.6) (26)

Net income 71 24 Add: Retained earnings January 1 181 34 Deduct: Dividends (50) (16)

Retained earnings December 31 $202 $ 42 Balance Sheet at December 31 Cash $ 18 $ 15 Accounts receivable—net 80 20 Dividends receivable from Son 7.2 —

Note receivable from Pop — 5 Inventory 95 10 Investment in Son 226.8 —

Land 65 30 Buildings—net 170 80 Equipment—net 130 50 Total assets $792 $210 Accounts payable $ 85 $ 10 Note payable to Son 5 —

Dividends payable — 8 Capital stock, $10 par 500 150 Retained earnings 202 42 Total equities $792 $210 ADDITIONAL INFORMATION