On January 1, 2009, Perry Company purchased 80% of Selby Company for $990,000. At that time Selby had capital stock outstanding of $350,000 and retained earnings of $375,000. The fair value of Selby Company’s assets and liabilities is equal to their book value except for the following:

One-half of the inventory was sold in 2009, the remainder was sold in 2010. At the end of 2009, Perry Company had in its ending inventory $60,000 of merchandise it had purchased from Selby Company during the year. Selby Company sold the merchandise at 25% above cost. During 2010, Perry Company sold merchandise to Selby Company for $310,000 at a markup of 20% of the selling price. At December 31, 2010, Selby still had merchandise that it purchased from Perry Company for $82,000 in its inventory.
Financial data for 2010 are presented here:

Required:
A. Prepare the consolidated statements workpaper for the year ended December 31, 2010.
B. Calculate consolidated retained earnings on December 31, 2010, using the analytical or t-accountapproach.

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Fair Value Book Value $210,000 780,000 $160,000 630,000 Inventorv Plant and Equipment (10-year life) Perry CompanySelby Company 800,000 800,000 $1,400,000 20,000 1,420,000 Sales Dividend Income Total Revenue Cost of Goods Sold: Beginning Inventory 230,000 900.000 1,130,000 450,000 680,000 250,000 930,000 490,000 145,000 380,000 525,000 200,000 325,000 195,000 520,000 280,000 Purchases Cost of Goods Available Less: Ending Inventory Cost of Goods Sold Other Expenses Total Cost and Expense Net Income 1,500,000 490,000 1/1 Retained Earnings Net Income Dividends Declared 12/31 Retained Earnings 480,000 280,000 (50,000) 25,000) 735,000 $1,940,000 70,000 90,000 200,000 Cash Accounts Receivable (net) Inventorv Investment in Selby Company Plant and Equipment (net) Other Assets (net) 95,000 302,000 450,000 990,000 850,000 390,000 3,077,000 585,000 230,000 1,175.000 Total Assets Accounts Payable Other Liabilities Common Stock Retained Earnings 75,000 102,000 960,000 1,940,000 $3,077,000 30,000 60,000 350,000 735,000 $1、175.000 Total Liabilities and Equity