P 4-8 Workpapers (excess due to undervalued land and goodwill) Separate-company financial statements for Pun Corporation and its subsidiary, Son Company, at and for the year ended December 31, 2012, are summarized as follows (in thousands): Pun Son Combined Income and Retained Earnings Statement for the Year Ended December 31 Sales Income from Son Cost of sales Expenses Net income $400 $100 21.6 (250) (100.6) 71 (50) (26) 24 Add: Retained earnings January 1 Deduct: Dividends Retained earnings December 31 181 34 (50) $202 (16) $ 42 Son Pun 2 CHAPTER 4 $ 15 20 Balance Sheet at December 31 Cash Accounts receivable-net Dividends receivable from Son Note receivable from Pun Inventory Investment in Son Land Buildings-net Equipment-net Total assets $18 80 7.2 5 10 95 226.8 65 170 30 80 50 130 $210 $792 10 $ 85 Accounts payable Note payable to Son Dividends payable Capital stock, $10 par Retained earnings Total equities _ 150 500 42 $210 202 $792 ADDITIONAL INFORMATION 1. Pun Corporation acquired 13,500 shares of Son Company stock for $15 per share on January 1, 2011 when Son's stockholders' equity consisted of $150,000 capital stock and $15,000 retained earnings 2. Son Company's land was undervalued when Pun acquired its interest, and accordingly, $20,000 of the fair value/book value differential was assigned to land. Any remaining differential is goodwill. 3. Son Company owes Pun $5,000 on account, and Pun owes Son $5,000 on a note payable. REQUIRED: Prepare consolidation workpapers for Pun Corporation and Subsidiary for the year ended December 31, 2012