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Son is a 90%owned subsidiary of Pop, acquired for $94,500 cash on 7/1/16, when Suns net assets consisted of $100,000 common stock and $5,000 retained earnings. The cost of Pops 90% interest in Son was equal to book value and fair value of the interest acquired ($105,000 * 90%), and accordingly, no allocation to identifiable and unidentifiable assets was needed.

Pop sells inventory items to Son on a regular basis, and the intercompany transaction data for 2019 are as follows:

Sales to Son in 2019 $20,000

CGS (for intercompany sales) 15,000

Unrealized profit in Sons inventory at 12/31/18 (sold during 2019) 2,000

Unrealized profit in Sons inventory at 12/31/19 2,500

Sons accounts payable to Pop at 12/31/19 10,000

Pops Equity Method Accounting

At 12/31/18, Pops Investment in Son had a balance of $128,500. This balance consisted of Pops 90% equity in Sons $145,000 net assets on that date less $2,000 unrealized profit in Sons 12/31/18, inventory.

During 2019, Pop made the following entries for its investment in Son under the equity method:

Cash (+A) 9,000

Investment in Son (-A) 9,000

To record dividends from Son ($10,000 * 90%)

Investment in Son (+A) 26,500

Income from Son (R, +SE) 26,500

To record income from Son for 2019 computed as follows:

Equity in Sons net income ($30,000 * 90%) $27,000

Add: 2018 inventory profit recognized in 2019 2,000

Less: 2019 inventory profit deferred at year-end -2,500

$26,500

The intercompany sales that led to the unrealized inventory profits were downstream, so we recognize the full amount of profit deferred in 2018 in 2019, and the full amount of the unrealized inventory profit originating in 2019 is deferred at 12/31/19. Pops Investment in Son increased from $128,500 at 1/1/19, to $146,000 at 12/31/19, the entire change consisting of $26,500 income less $9,000 dividends for the year.

Pop and Son Consolidation Workpaper for the Year Ended 12/31/19 (in thousands)
			Eliminations
	Pop	Son	DR	CR	Consolidated
Sales	$1,000	$300
Income from Son	26.5
CGS	550	200
Other expenses	350	70
Consol. NI
Noncontrol. share
Control. share	$126.5	$30
R/E - Pop	$194
R/E - Son		$45
+ Control. share	126.5	30
Dividends	50	10
R/E 12/31	$270.5	$65
Cash	$30	$5
Acc. Receiv.	70	20
Inventory	90	45
Other current assets	64	10
PP&E - net	800	120
Investment in Son	146
	$1,200	$200
Acc. Pay.	$80	$15
Other liabil.	49.5	20
Comm. stock	800	100
R/E	270.5	65
	$1,200	$200
Noncontrol. Inter. 1/1
Noncontrol. Inter. 12/31

Required: Prepare the needed eliminations and complete the consolidation workpaper for 12/31/19.

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