# Question: On January 1 2010 Perry Company purchased 80 of Selby

On January 1, 2010, Perry Company purchased 80% of Selby Company for \$960,000. At that time Selby had capital stock outstanding of \$400,000 and retained earnings of \$400,000.
The fair value of Selby Company’s assets and liabilities is equal to their book value except for the following:
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One-half of the inventory was sold in 2010; the remainder was sold in 2011.
At the end of 2010, Perry Company had in its ending inventory \$54,000 of merchandise it had purchased from Selby Company during the year. Selby Company sold the merchandise at 20% above cost. During 2011, Perry Company sold merchandise to Selby Company for \$300,000 at a markup of 20% of the selling price. At December 31, 2011, Selby still had merchandise that it purchased from Perry Company for \$78,000 in its inventory.
Financial data for 2011 are presented here:
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Required:
A. Prepare the consolidated statements workpaper for the year ended December 31, 2011.
B. Calculate consolidated retained earnings on December 31, 2011, using the analytical or t-accountapproach.
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