Question

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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  • CreatedMarch 13, 2015
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