The pretax operating incomes of Pop Corporation and Son Corporation, its 70 percent-owned subsidiary, for 2016 are as follows (in thousands):

ADDITIONAL INFORMATION
1. Pop received $280,000 dividends from Son during 2016.
2. Goodwill from Pop's investment in Son is not amortized.
3. Pop sold equipment to Son at a gain of $500,000 on January 1, 2016. Son is depreciating the equipment at a rate of 20 percent per year.
4. A flat 34 percent tax rate is applicable.
5. Pop provides for income taxes on undistributed income from Son.
REQUIRED:
1. Determine the separate income tax expenses for Pop and Son.
2. Determine Pop's income from Son on an equity basis.
3. Prepare a consolidated income statement for Pop Corporation and Subsidiary for the year ended December 31, 2016.

Transcribed Image Text:

Pop $8,000 Son Sales Gain on equipment Cost of sales Other expenses Pretax income (excluding Pop's $4,000 500 (5,000) (2,000) (2,100)(1,200) $1,400 $ 800 )(D income from Son)