P7-4 Computations of separate and consolidated statements given Pop Corporation acquired an 80 percent interest in Son Corporation on January 1, 2016, for $640,000, at which time Son had capital stock of $400,000 outstanding and retained earnings of $200,000. The price paid reflected a $200,000 undervaluation of Son’s plant and equipment. The plant and equipment had a remaining useful life of eight years when Pop acquired its interest.

Separate and consolidated financial statements for Pop and its subsidiary, Son Corporation, for the year ended December 31, 2018, are as follows (in thousands):

Pop Son Consolidated Combined Income and Retained Earnings Statement for the Year Ended December 31, 2018 Sales $ 360 $200 $ 460 Income from Son 40 — —

Interest income — 16 —

Cost of goods sold (220) (120) (220)

Operating expenses (60) (36) (116)

Interest expense (36) — (18)

Loss — — (6)

Noncontrolling interest share — — (16)

Controlling share of net income 84 60 84 Add: Beginning retained earnings 588 270 588 Deduct: Dividends (40) (30) (40)

Ending retained earnings $ 632 $300 $ 632 Balance Sheet at December 31, 2018 Cash $ 120 $ 52 $ 172 Accounts receivable 240 120 330 Inventories 200 100 280 Plant and equipment 1,000 400 1,560 Accumulated depreciation (200) (100) (360)

Investment in Son stock 640 — —

Investment in Pop bonds — 208 —

Total assets $2,000 $780 $1,982 Accounts payable $ 160 $ 80 $ 210 10% bonds payable 408 — 204 Common stock 800 400 800 Retained earnings 632 300 632 Noncontrolling interest — — 136 Total equities $2,000 $780 $1,982 Intercompany Profit Transactions—Bonds 267 Son sells merchandise to Pop but never purchases inventory from Pop. On January 1, 2018, Son purchased $200,000 par of 10 percent Pop Corporation bonds for $212,000. These bonds mature on December 31, 2020, and Son expects to hold the bonds until maturity. Both Son and Pop use straightline amortization. Interest is payable on December 31.

REQuIRED:Show computations for each of the following items:

1. The $6,000 loss in the consolidated income statement 2. The $460,000 consolidated sales 3. Consolidated cost of goods sold of $220,000 4. Intercompany profit in beginning inventories 5. Intercompany profit in ending inventories 6. Consolidated accounts receivable of $330,000 7. Noncontrolling interest share of $16,000 (Hint: The amount $16,000 may be incorrect.)

8. Noncontrolling interest at December 31, 2018 9. Investment in Son stock at December 31, 2017 10. Investment income account of $40,000 (Pop’s books)